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Fun With Robert Samuelson: The Good News Is Bad News

4:50 am in Uncategorized by Dean Baker

NewsIt’s always entertaining to read Robert Samuelson’s columns on Monday mornings. They are so deliciously orthogonal to reality. Today’s column, asking whether America is in decline, is another gem.

He starts with a set of “good news” items from a paper issued by Goldman Sachs:

For starters, the U.S. economy is still the world’s largest by a long shot. Gross domestic product (GDP) is almost $16 trillion, ‘nearly double the second largest (China), 2.5 times the third largest (Japan).’ Per capita GDP is about $50,000; although 10 other countries have higher figures, most of the countries are small — say, Luxembourg.

That sounds good, except that having double the GDP of China depends on looking at exchange rate measures of GDP. This figure is inflated by the over-valued dollar and under-valued yuan. Using the purchasing power parity measure of GDP, the gap is much smaller, with the IMF projecting it will go the other way by 2017. According to some estimates China’s GDP is already larger than ours, so it’s probably best to keep this celebration short.

It is true that the U.S. has a higher per capita income than Germany, France, and most other wealthy countries. But by far the main reason for this gap is that we work about 25 percent more on average than workers in Western Europe who all get 4-6 weeks a year vacation, paid parental leave, and paid sick days. This is far more an issue of a different trade-off between work and leisure than a question of people in the United States being richer.

Next we get the good news about our massive energy resources:

In turn, the oil and gas boom bolsters employment. A study by IHS , a consulting firm, estimates that it has already created 1.7 million direct and indirect jobs. By 2020, there should be 1.3 million more, reckons IHS.

Ignoring the issue of pollution from drilling out this windfall, it is important to put these jobs numbers in perspective. These are gross jobs, not net jobs. In other words, the vast majority of the 3 million jobs that IHS is promising us in oil and gas by 2020 are not additional jobs to those that would otherwise exist in the absence of these resources. These are jobs that displace jobs in education, medical research, health care, and other sectors. Samuelson may be excited that more people will be employed digging gas wells in 2020 and fewer educating the young, but the economic and social benefits of this reallocation of workers are not obvious.

Then we have the fact that we will be younger than other countries:

American workers will remain younger and more energetic than their rapidly aging rivals. By 2050, workers’ median age in China and Japan will be about 50, a decade higher than in America.

Yeah, you probably jumped ahead on this one. A main reason that we will be younger is that we have shorter life expectancies. The good news just keeps coming.

Then we have the U.S. as the prime destination for highly educated emigrants:

Moreover, the United States attracts motivated immigrants, including ‘highly educated talent.’ A Gallup survey of 151 countries found the United States was the top choice for those wanting to move, at 23 percent. At 7 percent, the United Kingdom was second.

Let’s see, the U.S. population is roughly five times as large as the U.K.’s population. That means if the poll reflects actual immigration patterns, then the U.K. will draw 50 percent more highly educated workers relative to the size of its population as the United States.

If Samuelson’s good news is not quite as good as he would like us to believe, the bad news is also not as bad:

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The Global Warming Lie Detector

1:39 pm in Uncategorized by Dean Baker

The House’s passage of the Waxman-Markey bill raises the possibility that the United States will finally do something on global warming. This prospect has the industry hacks screaming at top volume about the horrible fate that awaits the economy. Everyone should know not to take them seriously, as I will explain in a moment.

First, we should acknowledge the obvious: The bill is awful. It gives away permits to greenhouse gas emitters that should instead be auctioned. As a result, money that could be rebated to taxpayers or used to fund the development of clean technologies instead goes to the industries that are the source of the problem.

Second, the use of tradable permits rather than a tax is a rather questionable policy. Permits will almost certainly require more government enforcement bureaucracy than a system of taxes and subsidies. And, incidentally, permits will allow Goldman Sachs and our other Wall Street friends to make tens of billions of dollars on trading fees in the coming decades, a high priority for all Americans.

But a bad bill is almost certainly better than no bill. If Waxman-Markey doesn’t get through, it is Read the rest of this entry →