Got to stick up for my old macroeconomics teacher Arthur Okun. I don't think it is fair to say the thought all transfer buckets were very leaky. It is just true that there are better and worse ways to transfer income. A higher EITC, jiggled to be more like a wage subsidy than a family income supplement, is better than minimum wage, etc.
I agree we should allow more skilled immigrants into the country.
I can't wrap my head around the Democrats' insistence on tying better immigration policy to dealing with the undocumented folks already here. I get why they do it politically, but it's not like the harm caused by their stubbornness only affects Republicans. I would argue teaming up with Republicans on this would increase the Democrats' vote share. This is another case where Matt's right that the Democratic approach to Republican election theft seems to be to ensure Republicans can easily win fair and square.
On the Republican side, I see very little support for making it tougher for companies to hire undocumented workers. As I understand it, illegal entry is tightly coupled with job prospects across the border. Better enforcement of rules against hiring undocumented workers would drop illegal entry significantly.
So basically, neither side really cares about regaining control over who comes into the country. Both sides seem more interested in scoring political points and supporting their donors' financial interests than solving any real problems.
I'd just add that this would be a good time to switch from taxing wages to finance SS and Medicare (and ideally generous Federal employment insurance) to a VAT. this would shift the incentives toward working and (to the extent that employers are fooled into thinking the *they* pay part of the wage tax) incentive$ to hire. I'm surprised that this is not on Progressives' wish list like taxation of net CO2 emissions, a $15 minimum wage, higher immigration flows, and single payer health insurance.
Not so sure about the line "... macroeconomic management has been quite good." If the core problem is a supply shortage, then it would seem that the third stimulus package was a critical mistake. It would have been a good solution to a lack of demand. But given that the problem was lack of supply, it exacerbated the problems in the economy and boosted inflationary tendencies.
What makes things worse is that so far, I have not seen any evidence of regret about the stimulus, or any tendency to correct course.
I think one of the most important lessons we'll learn from the Great Pandemic is that there are no lessons to learn from the Great Pandemic. It's a one-off. It's a huge, once-in-a-century (probably) thing that threw everything into turmoil, and created a huge mess from which we will slowly recover.
You have to put someone in an induced coma and then slowly bring them out, they're not going to jump up and run a marathon. Especially if they get the frequent twinge that suggests that they're not yet fully recovered. It sucks, but it's where we are. You shut down the national/global economy, and it's going to take a while to get things back to normal. I'm amazed we've bounced back as far as we have. I'm not surprised that there have been knock-on effects, whether people being hesitant to rejoin the workforce (but how do they pay rent?), airline passenger rage, increased homicide rates, and all that other stuff that probably reflects that we've all been through a traumatic experience and are not yet all back.
I am at this point in my life very pro immigration. But, I see a proposal with adding mostly higher skilled immigrants. High skilled immigrants tend to be in the top 10% of income earners do we really want a situation where the top 10% the elite is like 60% immigrant and the rest of the country is like 5% immigrant. There is a bit of racial tension between Indian Americans and everyone else in Silicon Valley. I know I’m the UK where this has been done the top 1% is actually much more diverse than the rest of country.
I don’t know what the %threshold is that it gets weird but keep in mind the 1% of workers is like 1.5 million workers it is easy overwhelm that groups culture. With immigrants. The USA admits 1.5 million immigrants a year. It is actually believable that we could admit 500k Rick skilled people a year. The EB-5 visas are at there cap where have 500k.
I would *love* for someone to provide me a causal mechanism by which the poorest two quintiles capture a higher proportion of national income that doesn’t involve higher-than-2010’s inflation.
On the plus side, the labor supply shock is inducing firms to invest even more heavily in automation. See Bloomberg’s Nov 6th article, “Rise of the Robots Speeds Up in Pandemic With U.S. Labor Scarce”. [1] This will hopefully lead to a continuous boom in productivity and further enrich our populace with extremely low cost goods and services.
> Labor shortages and rising wages are pushing U.S. business to invest in automation. A recent Federal Reserve survey of chief financial officers found that at firms with difficulty hiring, one-third are implementing or exploring automation to replace workers. In earnings calls over the past month, executives from a range of businesses confirmed the trend.
I’m particularly hoping that the port congestion will finally gives us the political capital to upgrade our legacy ports
> Unions have long seen automation as a threat. At U.S. ports, which lag their global peers in technology and are currently at the center of a major supply-chain crisis, the International Longshoremen’s Association has vowed to fight it.
I recently read about a similar historical event whereby a shrinking labor supply forced industry to invest in automation with extreme and positive long term effects on society: the productionization of the spindle cotton picker in the late 1930s. [2]
> Eli Whitney’s cotton gin had created the Cotton South, but the Rust picker threatened to destroy it.
This invention accelerated the northern migration of black laborers to industrial jobs and out of the extreme poverty of substance sharecropping. Whereas previously the white establishment had implemented brutal measures to fight black migration and thereby maintain their exploited labor supply, the mechanization of cotton picking changed the incentives. In some cases, the local white establishment reversed their position and started to encourage black migration north due to their racist hatred.
You can read more about the social impact of this technological revolution in David Halberstam’s, “The Fifties”. There’s an excerpt on this specific chapter that covers the spindle cotton picker. [3] Strongly recommend the book for the numerous interesting stories it tells.
There was an article in the WP featuring an Indian American hotel owner. He was having to work the desk and clean rooms because he couldn’t find staff. He said there are jobs Americans just won’t do and he therefore needs to bring in people from India.
Left out of that discussion - won’t do for $10/hr. It seems quite clear that while immigration may be great for the country as a whole, it’s not great for those who don’t have the ability to write popular substack content or write code or sell ERP systems.
I think the debate around supplemental unemployment is worthy of deeper analysis.
In a labor market where supply is the binding constraint, paying supplemental unemployment absolutely must cause shortages. If we are observing that removing that benefit has not increased labor supply, then either (a) our observation is incorrect or (b) the negative costs associated with working exceed the value of the benefit, so it wasn't actually affecting the market on the aggregate.
I think there is probably some argument to be made that all of the ARP/CARES/Other Benefits provided to lower income people have provided enough savings to eat the cost of not working until, ideally, the experience of working improves.
>>” I think 20th-century free-market economics rather than any faddish leftist ideas is the ultimate misguided blank-slate ideology that ignores the biological foundations of the human experience.”
Picking fights with IDW/UofA now? That might be fun!
I don't understand how this view that inflation is caused by real supply shocks is consistent with Matt's other view that monetary policy controls inflation solely via expectations.
Got to stick up for my old macroeconomics teacher Arthur Okun. I don't think it is fair to say the thought all transfer buckets were very leaky. It is just true that there are better and worse ways to transfer income. A higher EITC, jiggled to be more like a wage subsidy than a family income supplement, is better than minimum wage, etc.
I agree we should allow more skilled immigrants into the country.
I can't wrap my head around the Democrats' insistence on tying better immigration policy to dealing with the undocumented folks already here. I get why they do it politically, but it's not like the harm caused by their stubbornness only affects Republicans. I would argue teaming up with Republicans on this would increase the Democrats' vote share. This is another case where Matt's right that the Democratic approach to Republican election theft seems to be to ensure Republicans can easily win fair and square.
On the Republican side, I see very little support for making it tougher for companies to hire undocumented workers. As I understand it, illegal entry is tightly coupled with job prospects across the border. Better enforcement of rules against hiring undocumented workers would drop illegal entry significantly.
So basically, neither side really cares about regaining control over who comes into the country. Both sides seem more interested in scoring political points and supporting their donors' financial interests than solving any real problems.
I'd just add that this would be a good time to switch from taxing wages to finance SS and Medicare (and ideally generous Federal employment insurance) to a VAT. this would shift the incentives toward working and (to the extent that employers are fooled into thinking the *they* pay part of the wage tax) incentive$ to hire. I'm surprised that this is not on Progressives' wish list like taxation of net CO2 emissions, a $15 minimum wage, higher immigration flows, and single payer health insurance.
Not so sure about the line "... macroeconomic management has been quite good." If the core problem is a supply shortage, then it would seem that the third stimulus package was a critical mistake. It would have been a good solution to a lack of demand. But given that the problem was lack of supply, it exacerbated the problems in the economy and boosted inflationary tendencies.
What makes things worse is that so far, I have not seen any evidence of regret about the stimulus, or any tendency to correct course.
I think one of the most important lessons we'll learn from the Great Pandemic is that there are no lessons to learn from the Great Pandemic. It's a one-off. It's a huge, once-in-a-century (probably) thing that threw everything into turmoil, and created a huge mess from which we will slowly recover.
You have to put someone in an induced coma and then slowly bring them out, they're not going to jump up and run a marathon. Especially if they get the frequent twinge that suggests that they're not yet fully recovered. It sucks, but it's where we are. You shut down the national/global economy, and it's going to take a while to get things back to normal. I'm amazed we've bounced back as far as we have. I'm not surprised that there have been knock-on effects, whether people being hesitant to rejoin the workforce (but how do they pay rent?), airline passenger rage, increased homicide rates, and all that other stuff that probably reflects that we've all been through a traumatic experience and are not yet all back.
I am at this point in my life very pro immigration. But, I see a proposal with adding mostly higher skilled immigrants. High skilled immigrants tend to be in the top 10% of income earners do we really want a situation where the top 10% the elite is like 60% immigrant and the rest of the country is like 5% immigrant. There is a bit of racial tension between Indian Americans and everyone else in Silicon Valley. I know I’m the UK where this has been done the top 1% is actually much more diverse than the rest of country.
I don’t know what the %threshold is that it gets weird but keep in mind the 1% of workers is like 1.5 million workers it is easy overwhelm that groups culture. With immigrants. The USA admits 1.5 million immigrants a year. It is actually believable that we could admit 500k Rick skilled people a year. The EB-5 visas are at there cap where have 500k.
I've heard a fair amount of anecdata that suggest that it isn't entirely COVID19 that made the workplace worse, but the customer behavior as well.
I would *love* for someone to provide me a causal mechanism by which the poorest two quintiles capture a higher proportion of national income that doesn’t involve higher-than-2010’s inflation.
Because I’m just not seeing it.
On the plus side, the labor supply shock is inducing firms to invest even more heavily in automation. See Bloomberg’s Nov 6th article, “Rise of the Robots Speeds Up in Pandemic With U.S. Labor Scarce”. [1] This will hopefully lead to a continuous boom in productivity and further enrich our populace with extremely low cost goods and services.
> Labor shortages and rising wages are pushing U.S. business to invest in automation. A recent Federal Reserve survey of chief financial officers found that at firms with difficulty hiring, one-third are implementing or exploring automation to replace workers. In earnings calls over the past month, executives from a range of businesses confirmed the trend.
I’m particularly hoping that the port congestion will finally gives us the political capital to upgrade our legacy ports
> Unions have long seen automation as a threat. At U.S. ports, which lag their global peers in technology and are currently at the center of a major supply-chain crisis, the International Longshoremen’s Association has vowed to fight it.
I recently read about a similar historical event whereby a shrinking labor supply forced industry to invest in automation with extreme and positive long term effects on society: the productionization of the spindle cotton picker in the late 1930s. [2]
> Eli Whitney’s cotton gin had created the Cotton South, but the Rust picker threatened to destroy it.
This invention accelerated the northern migration of black laborers to industrial jobs and out of the extreme poverty of substance sharecropping. Whereas previously the white establishment had implemented brutal measures to fight black migration and thereby maintain their exploited labor supply, the mechanization of cotton picking changed the incentives. In some cases, the local white establishment reversed their position and started to encourage black migration north due to their racist hatred.
You can read more about the social impact of this technological revolution in David Halberstam’s, “The Fifties”. There’s an excerpt on this specific chapter that covers the spindle cotton picker. [3] Strongly recommend the book for the numerous interesting stories it tells.
[1] https://www.bloomberg.com/news/articles/2021-11-06/rise-of-the-robots-speeds-up-in-pandemic-with-u-s-labor-scarce
[2] https://encyclopediaofarkansas.net/entries/john-daniel-rust-2272/
[3] https://waverlyhs.weebly.com/us-history-blog-may-2016---may-2017/the-1950s-the-great-migration-the-mechanical-cotton-picker
There was an article in the WP featuring an Indian American hotel owner. He was having to work the desk and clean rooms because he couldn’t find staff. He said there are jobs Americans just won’t do and he therefore needs to bring in people from India.
Left out of that discussion - won’t do for $10/hr. It seems quite clear that while immigration may be great for the country as a whole, it’s not great for those who don’t have the ability to write popular substack content or write code or sell ERP systems.
I think the debate around supplemental unemployment is worthy of deeper analysis.
In a labor market where supply is the binding constraint, paying supplemental unemployment absolutely must cause shortages. If we are observing that removing that benefit has not increased labor supply, then either (a) our observation is incorrect or (b) the negative costs associated with working exceed the value of the benefit, so it wasn't actually affecting the market on the aggregate.
I think there is probably some argument to be made that all of the ARP/CARES/Other Benefits provided to lower income people have provided enough savings to eat the cost of not working until, ideally, the experience of working improves.
I feel like realistically, fixing housing isn't possible but immigration restriction is. So there is a fun place to leave things.
It’s gonna take another generation before the conventional wisdom admits that the Great Recession was a deflationary debacle of mismanagement.
The people who orchestrated that debacle are still the economic thought leaders of the Democratic Party.
The Democrats have a zombie leadership problem. For them, a new idea is an old idea that was discarded for being wildly unpopular.
>>” I think 20th-century free-market economics rather than any faddish leftist ideas is the ultimate misguided blank-slate ideology that ignores the biological foundations of the human experience.”
Picking fights with IDW/UofA now? That might be fun!
I don't understand how this view that inflation is caused by real supply shocks is consistent with Matt's other view that monetary policy controls inflation solely via expectations.
Dont blame me I pay my peons (or more accurately pee-ons) more than $15 an hour