A few days ago, WTOP Radio’s Dimitri Sotis interviewed me on some of the economics of ‘buying local.‘ (Mr. Sotis got the idea for this interview by watching this Everyday Economics video.)
The Obama Administration has announced plans to require overtime pay for salaried employees who earn less than $50,440 a year—despite the fact that economic research shows that employers will offset new overtime costs by lowering base salaries. These regulations will have little effect on total weekly earnings or hours worked; they will require employers to rigidly monitor salaried employees’ hours. This would proscribe the flexible working arrangements that many salaried employees value. These regulations will limit workplace flexibility without improving pay. Expanding overtime regulations to more salaried employees will hurt the workers the White House intends to help.
If investors use Greece’s precarious financial position as an excuse to bail out of bonds issued by other highly indebted countries, such as Portugal and Italy, that in itself is not a sign of contagion. As the late economist Anna Schwartz wrote: “Capital flight from countries with similar unsustainable policies is not evidence of contagion.” Rather, nations “are vulnerable because of their home-grown economic problems.”
Schwartz wrote that in 1998 in response to the Asian financial crisis, but her point is equally valid today. If capital exits Portugal following Greece’s “no” vote, it’s not because Portugal contracted Greece’s infection. Portugal was already sick. And the largest share of its debt is owned by foreigners. Greece was merely a reminder of what happens when a nation’s debt exceeds its ability to service it.
While I, in the same spirit as Paul Krugman, object to any insinuation that countries compete with each other economically – and while I also dispute the suggestion that the creation of more manufacturing jobs in America would necessarily make ordinary Americans more prosperous – this report has an interesting opening sentence:
A recent report projected that the cost of manufacturing in the U.S. will fall below costs in China within the next three years, in large part due to the rise of fracking.