Marketplace of Ideas
Here are some key stories in economic news this week:
- The Bureau of Labor Statistics reported today that total payroll employment in the U.S. has finally regained its pre-recession peak. That’s just six and a half years after the recession ended—the longest recovery time since World War II. But with the jobs gap finally closed, The New York Times’ Upshot blog asks, “Why aren’t we happier?” The Upshot says one reason is because while there are now as many jobs as there were before the recession, the number of people “who might wish to hold them” is up by 15 million. Not so fast. That’s the increase in the civilian non-institutional population, which is up about 6.5 percent sine January 2008. But the labor force has only grown about 1 percent: The wave of retiring baby boomers is lowering the labor force participation rate, which was just 62.8 percent in May. As our chart shows, there is no sign of a post-recession bounceback from so-called discouraged workers reentering the workforce. AIER’s latest Business Cycle Conditions report is consistent with further strengthening of the labor market as the economy recovers from a winter lull.
- “We dream big dreams.” That’s what Seattle’s hometown newspaper, the Post Intelligencer, has to say about the city’s new $15 minimum wage, approved by the city council on Monday. That’s more than double the current $7.25 federal minimum, which prevails in much of the country. Will this “historic” action save low-wage workers from penury, or will employers just phase human workers out in favor of computers and robots—so called “capital-labor substitution”? It may be a while before we find out: The increase will be phased in over three to seven years, with a slower adoption time for small businesses. Keep in mind that Washington State already has the highest minimum wage in the country, currently $9.32. It is adjusted each year based on a cost of living index, the result of 1998 law that opponents warned would be a “job-killer.” Bloomberg says that prediction “hasn’t been borne out.” Washington’s job growth is above the national average, and its poverty rate is below.
- Calls for reparations for slavery normally don’t get much traction in the U.S. Activists, usually on the left, promote the idea and everyone else ignores them. But a recent essay in the Atlantic by Ta-Nehisi Coates has prompted a more thoughtful debate on both sides of the political spectrum. Coates tracks the economic consequences of 250 years of enslavement and another 100 years of local, state, and federal government laws that have hindered African Americans’ equal access to economic liberties. The progressive New Deal policies were some of the worst offenders. Responding in the conservative National Review, Kevin Williamson largely agrees with the problems Coates documents, but he doesn’t agree that reparations are the solution: “The people to whom reparations were owed are long dead; our duty is to the living, and to generations yet to come,” he writes. The Economist has also weighed in, doubting that reparations are a practical consideration in the U.S. but quoting Lyndon Johnson, who said that the higher incidence of poverty among African Americans is “solely and simply the consequence of ancient brutality, past injustice, and present prejudice.” Meanwhile, Dow Jones’ MarketWatch, hardly a bastion of radicalism, argues that those who say reparations are impossible “ignore how much the government already spends every year to nurture the wealth of the (largely white) middle class.” The debate seems to come down to whether government policies, which have long been part of the problem, can be part of the solution.