We often hear that there has been almost no growth in real wages in the past few decades. For example, in a 2018 book, Oren Cass, a lawyer who is chief economist at American Compass, stated that between 1975 and 2015, “the median worker’s wages have barely budged.”
Michel notes several problems with Cass’s claim. I’ll highlight two. First, to adjust wages for inflation so that he can compare real wages over time, Cass uses the Consumer Price Index (CPI), which notoriously overstates inflation. A better index, which also overstates inflation but less so, is the Personal Consumption Expenditure (PCE) index. Using this index, Michel shows that between 1975 and 2015, real wages grew by 22 percent, compared to the 1 percent that Cass computed using the CPI. Second, an important component of wages is employer-provided benefits. Between 1973 and 2019, which was the approximate time period that Cass discussed, these nonwage benefits grew from 13 percent of total compensation to 30 percent. In short, real wages, properly measured, have grown by a large percent since 1973.
In a now-famous 2013 article in the American Economic Review, MIT economist David Autor and his co-authors, David Dorn of the University of Zurich and Gordon Hanson of UC-San Diego, presented evidence on what is now called the “China shock.” They showed that areas of the United States into which imports from China had most penetrated, after trade with China was opened in 2000, lost jobs. More important, they showed, many of the workers who lost those jobs failed to find other work quickly.
But other economists, including Nicholas Bloom of Stanford and his three co-authors, found offsetting positive effects of the China shock. In areas of the country that started with “high initial levels of human capital,” the China shock led to increases in non-manufacturing jobs. A dynamic economy, which ours is, will tend to have increases in jobs in one area and decreases in another.
Some pundits have suggested that the federal government subsidize those who lose jobs due to increases in trade. Autor et al. noted that we have such a program. It’s called Trade Adjustment Assistance (TAA). According to Autor et al., TAA, Social Security Disability Insurance, and Supplemental Security Income all rose substantially in areas with high exposure to imports. Disappointingly, Michel does not come out and point to a reasonable hypothesis, namely that these increases in transfer payments caused many workers to stay where they had lost jobs instead of moving to new jobs in other areas.
Timothy Taylor explains how “the US tax code reduces R&D incentives.”
The US budget deficit has been higher than the OECD average every year since at least 2007. Politicians in many countries are fiscally irresponsible, but US politicians appear to be more irresponsible than most.
Thomas McKenna reports on AOC’s and Bernie Sanders’s favorite candidate to be the next mayor of New York City. Two slices:
Zohran Mamdani is promising New Yorkers the world if they make him their next mayor. The self-styled “democratic socialist” is running in the city’s Democratic primary on a platform that includes free bus rides, a $30 minimum wage and city-owned grocery stores. In a crowded race, the two-term state assemblyman from the Queens neighborhood of Astoria has come out of nowhere. Only a few months ago, former Gov. Andrew Cuomo seemed a lock in the June 24 primary—the real contest in deep-blue New York City. But with days to go, the 33-year-old Mr. Mamdani is clipping the front-runner’s heels.
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Someone would have to pay for “free” buses, child care and the 200,000 affordable units Mr. Mamdani aims to build. Followers of Sen. Bernie Sanders (I., Vt.) and Rep. Alexandria Ocasio-Cortez (D., N.Y.)—who have both endorsed Mr. Mamdani—know the refrain: Tax the rich. He would need Albany’s permission, but Mr. Mamdani hopes to raise taxes on businesses and add a 2% flat tax on residents with annual income of more than $1 million. As if the high earners already moving to Florida and Texas needed more reason to skip town.
Solar power (and wind power for that matter) has several major problems as a large-scale source of electricity for the grid. The most important problem is its intermittent nature. Solar panels don’t generate electricity at night. Nor do they generate much when it is cloudy. Furthermore, power generation is unreliable — it changes over seasons and can’t be dialed up or dialed down based on people’s demand for electricity — such as during severe weather events. The main way to deal with this problem entails massive energy storage (in effect, giant batteries) that are prohibitively expensive to build at scale.
Another oft-overlooked problem is the cost of transmission. The best locations for solar power installations are not necessarily near places with high demand for electricity. In fact, cities with high demand for electricity also have much higher opportunity costs for land than rural areas. But building transmission lines is expensive and not usually factored into the cost/benefit analysis of solar installations because regulators require utility companies (really their rate payers) to foot the bill of building transmission lines.
