Should government food assistance programs have nutritional requirements?

Some of the foods you can purchase through WIC.

Probably.

There’s good reason to believe that adding nutritional requirements to government food programs is a better use of money and leads to better health outcomes for the people in said programs.

WIC (Women, Infants, and Children) is a state-run program that helps low-income women and children purchase healthy food. WIC has specific guidelines for the quantities and types of food recipients can purchase, all of which have to meet certain health standards. In this program there is no way to purchase soda, candy, pizza, baked sweets, ice cream, etc. SNAP (Supplemental Nutrition Assistance Program, often referred to as “food stamps”) is a federally-funded program helping low-income people purchase almost any food.

The USDA explains that SNAP is for purchasing any food or food product for home consumption and that this definition includes “soft drinks, candy, cookies, snack crackers, and ice cream” and similar items. Data suggest these types of purchases make up at least 17% of SNAP spending . In 2017, about 42 million people used SNAP at an average of $125.79 per person per month, meaning the government spent about $11.3 billion that year buying junk food for low-income people. What are the arguments for spending so much on junk rather than using those funds to ensure low-income people have high quality food?

Opponents of SNAP nutritional requirements give many reasons for why nutritional requirements are not feasible or effective: we can’t come up with clear standards for what is “healthy,” it would be too complicated and costly to implement such standards, restrictions wouldn’t stop people from buying unhealthy food with their own money, and people in higher income brackets purchase similar amounts of unhealthy food.

Yet WIC has managed to define what constitutes healthy food and implement a program based on those boundaries. In fact the USDA describes WIC as “one of the nation’s most successful and cost-effective nutrition intervention programs.” There is evidence to suggest people participating in WIC (especially children) have better nutrition and health outcomes than their peers. Conversely, there is evidence to suggest people who receive SNAP benefits have worse nutrition than income-eligible people who don’t participate in SNAP. For example:

Changing WIC changes what children eat – May 2013

Comparing July to December in 2008 and 2011, increases were observed in breastfeeding initiation (72.2-77.5%); delaying introduction of solid foods until after 4 months of age (90.1-93.8%); daily fruit (87.0-91.6%), vegetable (78.1-80.8%), and whole grain consumption (59.0-64.4%) by children aged 1-4 years; and switches from whole milk to low-/nonfat milk by children aged 2-4 years (66.4-69.4%). In 1-year-old children, the proportion ≥95th percentile weight-for-recumbent length decreased from 15.1 to 14.2%; the proportion of children 2- to 4-year-old with body mass index (BMI) ≥95th percentile decreased from 14.6 to 14.2%.

Trends in Obesity Among Participants Aged 2–4 Years in the Special Supplemental Nutrition Program for Women, Infants, and Children – November 2016

The prevalence of obesity among young children from low-income families participating in WIC in U.S. states and territories was 14.5% in 2014. This estimate was higher than the national estimate (8.9%) among all U.S. children in a slightly different age group (2–5 years) based on data from the 2011–2014 National Health and Nutrition Examination Survey (7). Since 2010, statistically significant downward trends in obesity prevalence among WIC young children have been observed overall, in all five racial/ethnic groups, and in 34 of the 56 WIC state agencies, suggesting that prevention initiatives are making progress, potentially by impacting the estimated excess of calories eaten versus energy expended for this vulnerable group (8).

The Supplemental Nutrition Assistance Program – September 2015

Child SNAP recipients consume more sugary beverages, processed meats, and high-fat dairy products, but fewer nuts, seeds, and legumes than income-eligible nonparticipants. Similarly, adult SNAP recipients consume more fruit juice, potatoes, red meat, and sugary beverages, but fewer whole grains than income-eligible nonparticipants. In another study, SNAP participants had lower dietary quality scores overall, and consumed significantly fewer fruits, vegetables, seafood, and plant proteins, but significantly more added sugar than income-eligible nonparticipants.

The study specifically compares SNAP nutrition to WIC nutrition:

In one study comparing the grocery store purchases of SNAP and WIC households in New England, SNAP households purchased more than double the amount of sugary beverages per month (399 ounces) than WIC households (169 ounces), 72% of which were paid for with SNAP dollars. In a 3-month study, new SNAP participants significantly increased their consumption of refined grains compared with low-income people who did not join. In a study of Hispanic Texan women, SNAP participants consumed 26% more sugary beverages and 38% more sweets and desserts than low-income nonparticipants.

Furthermore, most of the people who use SNAP believe the program should not allow recipients to purchase unhealthy food:

54% of SNAP participants supported removing sugary drinks from SNAP eligibility. In another survey of 522 SNAP stakeholders, 78% of respondents agreed that soda, and 74% agreed that “foods of low nutritional value” such as candy and sugar-sweetened fruit drinks should not be eligible for purchase with benefits. Seventy-seven percent of respondents believed that SNAP benefits should be consistent with the DGAs [Dietary Guidelines for Americans], and 54% thought that SNAP should be reformulated into a defined food package similar to WIC.

I want to live in a society where people are healthy and no one goes hungry. SNAP can and should serve both goals.

Stuff I Say at School – Part IV: The Rise and Fall of the 6th Party System

This is part of the Stuff I Say at School series

The Assignment

Although scholars generally agree on the timing of of the first few critical elections/realignments, consensus breaks down on the timing of the 6th and 7th party systems. Do you think the 6th party system began in 1968, 1980, or sometime later? What about the 7th party system?  Please think critically and resist giving the answer you hope to be true.

The Stuff I Said

Political psychologist Lilliana Mason argues that over the last 50 years or so, parties have become “more homogeneous in ideology, race, class, geography, and religion,” causing “partisans on both sides [to feel] increasingly connected to the groups that [divide] them” (pg. 40). In other words, political partisanship has become associated with other forms of social identity and therefore has itself become an identity. For example, “party identity is strongly predicted by racial identity, not racial-policy positions (Mangum 2013). The parties have grown so divided by race that simple racial identity, without policy content, is enough to predict party identity. The policy division that began the process of racial sorting is no longer necessary for Democrats and Republicans to be divided by race. Their partisan identities have become firmly aligned with their racial identities, and decoupled from their racial-policy positions” (pg. 33, italics mine). It is this fusion of social and political identity that leads me to lean in favor of those scholars that identify the 1980s with the emergence of the 6th party system. I lean this way largely due to the rise of the Religious Right in the 1970s (I’d add the rise of “neoliberal” ideology associated with Reagan and Thatcher and solidified by the fall of the Berlin Wall, the collapse of the Soviet Union, and the ending of the Cold War). While Jimmy Carter was popular among religious conservatives, many of his policy stances alienated these same voters, paving the way for Reagan and the Republican identification with conservative Christians. By 1992, the religious divide between Democrats and Republicans had, in Mason’s words, “cracked open…The difference between the parties on the percentage of weekly churchgoers had increased to an 11 percentage point gap, with Republicans more churchgoing than Democrats. Connected to this new divide, Democrats in 1992 were only 2 percent more Catholic than Republicans. Twenty years earlier the difference had been 13 percentage points. The conservative religious were moving toward the Republican Party” (pg. 36). By 2012, “parties differed by 14 percentage points in how many attend religious services each week” (pg. 37). 

I’m unsure if a firm 7th political system has arisen. However, I think we’re beginning to see the crumbling of the 6th party system. The identity politics mentioned above will likely increase in the era of globalization and social media. The election of Trump may be the first inklings of an identity politics party system, along with the recent uptick in student activism and fragility on college campuses. What’s worse, having more extreme political views actually increases one’s happiness. From a recent study:

Results show that congruence of political affiliations of national politicians, especially the president, with individual party affiliation has an effect on reported happiness while there is no effect of state, gubernatorial or legislative, party congruence. Individuals report being happier when the president is a member of their own party. Throughout all specifications, republicans and those holding conservative political values report higher happiness. Shockingly, regardless of liberal or conservative political values, those who hold extreme political values report higher levels of happiness. The large effect of partisanship and extreme views on reported happiness support the view that partisanship is a result of social identity and provides a psychological need for certainty and structure (pg. 10).

Economist Arthur Brooks, current president of the American Enterprise Institute, made this point years ago in his book Gross National Happiness:

Americans who describe themselves as holding extreme political views–somewhere between 10 and 20 percent of the population–are among the happiest people in America. All of those angry protesters who denounce Dick Cheney as a murderer; all of the professional political pundits who use the rhetoric of rage and misery to get on cable television–it turns out they’re not miserable at all. On the contrary, they’re enjoying themselves rather a lot. 

In 2004, 35 percent of people who said they were extremely liberal were very happy (versus 22 percent of people who were just liberal). At the same time, a whopping 48 percent of people who were extremely conservative gave this response (compared with 43 percent of nonextreme conservatives). Indeed, the gusto with which Bill Clinton’s attackers in 1998 went after him was really a clue that they were having a grand old time. George W. Bush’s harshest critics–those who have felt the predations of the Bush administration to the very depths of their soul–are quite likely to be a great deal happier than more moderate liberals. 

Why are ideologues so happy? The most plausible reason is religion–not real religion, but rather, a secular substitute in which they believe with perfect certainty in the correctness of their political dogmas. People want to hold the truth; questioning is uncomfortable. It is easy to live by the creed that our nation’s ills are because of George W. Bush; it is much harder to acknowledge that no administration is perfect–or perfectly awful. True political believers are martyrs after a fashion willing to shout slogans in public for causes they are sure are good, or against causes they are convinced are evil. They are happy because–unlike you, probably–they are positive they are right. No data could change their minds (pgs. 33-34).

In other words, being a political hooligan feels really good, which makes change unlikely once you’ve discovered the One True Party. Unfortunately, as Brooks points out,

the happiness of political extremists is an unhappy fact for America. They may themselves be happy, but they make others unhappy–that is, they actually lower our gross national happiness. In many cases, extremists actually intend to upset people–it is part of their strategy…Extremists are happy to stir up their own ranks, but they are even happier when they cause misery for their political opponents. For people on the far left and right, people who do not share their views are not just mistaken, but bad people, who are also stupid and selfish. They deserve to be unhappy…Extremists thrive on dehumanizing their opponents (pgs. 34-35).

Stuff I Say at School – Part III: Rodrik on China and Development

This is part of the Stuff I Say at School series.

The Assignment

Group Report on Dani Rodrik’s article “What’s So Special About China’s Exports?

The Stuff I Said

I’m going to bring in some resources that push back against Rodrik. 

2008 paper finds that Rodrik’s “analysis does not adequately address a significant factor that is important in accounting for China’s superior export performance. This factor is the regional trade and production integration mediated by foreign direct investment (FDI) in East and Southeast Asian economies. A close look at the role of FDI in connecting China with other Asian countries to form a regional trading network would improve the understanding of the characteristics of China’s trade structure and the challenges China faces in international trade” (pg. 100). In my view, Liang’s paper actually highlights the importance of trade and integration contra Rodrik’s somewhat dismissive attitude toward it. Yet, this may still be overestimating the “specialness” of China’s exports. A 2010 paper also points out that Rodrik relies on China’s average per capita GDP (PCGDP) to determine the “specialness” of its exports, yet “China’s coastal provinces, which account for over 90% of China’s exports, have an average PCGDP level 1.5 to 2 times that of China’s overall PCGDP. Without taking this into account, one would underestimate the export capability against which the relative export sophistication is evaluated.” What’s more, “although many of China’s exported goods belong to sophisticated categories, they may well be the low-quality varieties” (pg. 483). When these factors are controlled for, the “specialness” of China’s exports declines.

Rodrik is right to point out that China’s growth has largely been under what many call “state capitalism.” Yuen Yuen Ang’s work has traced the co-evolutionary development between markets and institutions within China. But as one of her book’s reviewers notes, the bureaucratic corruption that played a role in spurring market-oriented growth may end up holding it back. (The good thing is that recent evidence suggests that market reforms and anti-corruption reforms create a virtuous cycle.) However, what I find so odd about Dani Rodrik’s somewhat heterodox position on globalization is that he seems to think that because China has experience incredible growth in the midst of its government’s heavy-handedness, the answer for development is state intervention. He basically watches communist China grow once it begins to liberalize its markets and his response is, “Developing countries need more state intervention.”

Economists like Acemoglu and Robinson don’t deny that economic growth can occur under extractive institutions. It’s just that it can’t last in the long run. This is why openness is so important. As David Weil demonstrates,

Our first approach is to see how growth rates compare in open and closed countries…First, the average growth rate of income in the closed group, 1.5% per year, was significantly lower than in the open group, 3.1% per year. Second, among the economies that were closed some or all of the time, there is no observable relationship between the initial level of a country’s GDP and its subsequent rate of growth. Among the countries open to trade, by contrast, we find strong evidence of convergence:Poorer countries that are open tend to grow faster than richer countries. Putting the results in the two figures together, we can see that poor countries that are open to trade grow faster than rich countries, and poor countries that are closed to trade grow more slowly than rich countries. Our second approach to exploring the effect of openness on growth is to consider how changes in a country’s degree of openness affect growth rates. If within a particular country, a change in trade policy (a trade liberalization or the imposition of new trade restrictions) is followed by a change in the growth rate of output, this pattern can supply us with evidence about the way trade affects income.One of the most sweeping examples of trade liberalization comes from 19th-century Japan. In the 12 years after Japan ended its self-imposed economic isolation in 1858, the value of Japanese trade with the rest of the world rose by a factor of 70. The opening to trade is estimated to have raised Japanese real income by 65% over two decades, and put the country on a path of growth that would eventually cause it to catch up to European levels of income…This same effect of trade liberalization has occurred in the 20th century as well. In South Korea, following a sweeping liberalization of trade in 1964–1965, income grew rapidly, doubling in the next 11 years. Similarly, Uganda and Vietnam experienced rapid growth in the 1990s, following their integration into the world economy.In all these examples, increased openness led to higher growth. Conversely,when we look at cases in which openness decreased, we see evidence that lower growth followed. For example, the trade embargo instituted by President Thomas Jefferson in 1807–1809 spawned widespread unemployment and bankruptcy in the United States. Similarly, the wave of tariff increases throughout the world in 1930, including the U.S. Smoot-Hawley tariff, contributed to the severity of the Great Depression of the 1930s (pg. 327-329).

Weil, 2013, pg. 307.

Given the evidence above, I think China and other developing countries would do well to open their economies more.

Stuff I Say at School – Part II: Self-Interested Politicians

This is part of the Stuff I Say at School series.

The Assignment

After listening to [Benjamin] Ginsberg‘s lecture, do you agree with his assessment that politics is all about interests and power?

The Stuff I Said

Image result for the elephant in the brain

Kevin Simler and Robin Hanson’s recent book The Elephant in the Brain demonstrates that these underlying desires for power and status inform many of our decisions and behaviors in everyday life. Politicians certainly do not transcend these selfish motives by virtue of their office. I would actually add a subcategory to “status”: moral grandstanding. We want to paint ourselves as “good people” by signaling to others our superior moral quality. This allows us to enjoy the social capital that comes along with the improved reputation. We not only gain status, but we can also think of ourselves as do-gooders; crusaders who fight the good fight. Unsurprisingly, evidence suggests that we have inflated views  of our own moral character and that acts of moral outrage are largely self-serving. What’s unfortunate is that social media may be exacerbating moral outrage by making signaling both easier and less costly to the individual.

I think the rise of populism in both America and Europe is a timely example of interests at play. While various elements contribute to the populist mindset, economic insecurity is the water it swims in. And this insecurity has been exploited by politicians of more extreme ideologies across multiple countries. For example, the Great Recession eroded European trust in mainstream political parties: a one percentage point increase in unemployment was associated with a 2 to 4 percentage point increase in the populist vote. A 2016 study looked at the political results of financial crises in Europe from 1870 to 2014 and found that far-right parties were the typical outcome. In America, President Trump made “Make America Great Again” his rallying cry, feeding off the public’s distrust of “the Establishment” during the post-crisis years. In doing so, he advocated protectionism and tighter borders. Oddly enough, you find comparable populist sentiments on the Left: Bernie Sanders has been very anti-trade and iffy on liberalized immigration (open borders is “a Koch Brothers proposal“), all in the name of helping the American worker. One of his former campaign organizers–the newly-elected Congresswoman Ocasio-Cortez–has also expressed similar concerns over trade deals (especially NAFTA). This is why The Economist sees less of a left/right divide today and more of an open/close divide. Skepticism of trade and immigration wrapped in “power to the people” sentiments may be invigorating in rhetoric, but it’s asinine in practice. And it’s doing nothing more than riding the wave of voter anxiety. What’s worse, it’s hiding these politicians’ accumulation of power, attainment of status, and moral self-aggrandizement behind what Ginsberg so aptly calls “the veneer of public spiritedness.”

More Stuff

A classmate asked if I believed that politicians always acted in self-interest or if there were moral lines that some would not cross. In response, I pointed out that Simler and Hanson are largely arguing against what they see as the tendency for people to tiptoe around hidden motives and self-deception. It’s not that we’re only motivated by selfish motives. We just tend to gloss over them. But they are deeply embedded. Failing to acknowledge them not only has personal consequences, but public ones as well (their chapter on medicine is especially on point). I think we should consider moral motivations through all possible means available, including life experience and behavior. However, I think a healthy dose of skepticism is necessary. It can certainly help protect us against intentional deception. But perhaps more importantly, it helps protect us against unintentional deception. It’s easy to give more weight to life experience, moral principles, and the like when it’s a politician on “our side,” all while harshly judging those on “the other side” as unscrupulous. Political skepticism or cynicism can aid in keeping our own selfish motives and emotional highs in check. And it can lead us to seek out more information, improve our understanding, and refine our beliefs. Otherwise, we end up being consumed by our own good intentions and moral principles without actually learning how to implement these principles.

Image result for against democracy

My classmate also put forth a hypothetical to get a feel for my position: if legislative districts were redrawn so that legislators now represented districts with a different ideological makeup, how many would change their positions on issues just to stay in power? Personally, I think we would see a fair number of politicians shift their position because it is more advantageous. However, there is considerable evidence that political deliberation with ideological opposites actually backfires. Political philosopher Jason Brennan reviews the evidence in chapter 3 of his book Against Democracy and finds that political deliberation:

  • Undermines cooperation
  • Exacerbates conflict when groups are different sizes
  • Avoids debates about facts and is instead driven by status-seeking and positions of influence
  • Uses language in biased and manipulative ways, usually by painting the opposition as intrinsically bad
  • Avoids controversial topics and sticks to safe subjects
  • Amplifies intellectual biases

There’s more, but that should make my point. So even if some politicians did not flip flop in their newly-drawn districts, the above list should give us pause before we conclude that their doubling down is proof of disinterest in status or moral grandstanding.

I certainly believe that people have moral limits and lines they will not cross. My skepticism (which I prefer to the word cynicism, but I’m fine with interchanging them) is largely about honest self-examination and the examination of others. For example, consider something that is generally of no consequence: Facebook status updates. My Facebook feed is often full of political rants, social commentaries, and cultural critiques. Why do we do that? Why post a political tract as a status? It can’t be because of utility. A single Facebook status isn’t going to fix Washington or shift the course of society. It’s unlikely to persuade the unsaved among your Facebook friends. In fact, it’s probably counterproductive given our tendency for motivated reasoning. When we finally rid ourselves of the high-minded rationales that make next to zero sense, we find that it boils down to signaling: we are signaling our tribe. And that feels good. We get “Likes.” We get our worldview confirmed by others. We gain more social capital as a member of the group. We even get to moral grandstand in the face of that friend or two who hold (obviously) wrong, immoral beliefs. Sure, some of it may be about moral conviction and taking a stand. That certainly sounds and feels better. But I think we will all be better off if we realize that’s really what those behaviors are about: sounding and feeling good. And I think our politics will be better off if we apply a similar lens to it. 

And More Stuff

A classmate drew on Dan Ariely’s work to argue that people–including politicians–have a “personal fudge factor“: most people will cheat a little bit without feeling they’ve compromised their sense that they are a “good person.” When people are reminded of moral values (in the case of the experiments, the honor code or 10 commandments), they don’t cheat, including atheists. So while politicians may compromise their values here and there, they still have a moral sense of self that they are unlikely to violate.

In response, I pointed out that a registered replication report last year was unable to reproduce Ariely’s results. That doesn’t mean his results were wrong, just that we need to be cautious in drawing any strong conclusions from them.

When discussing his priming with the 10 Commandments on pg. 635, Ariely references Shariff and Norenzayan’s well-known 2007 study. This found that people behave more prosocially (in this case, generosity in experimental economic games) when primed with religious concepts. They offered a couple explanations for this. One hypothesis suggested that “the religious prime aroused an imagined presence of supernatural watchers…Generosity in cooperative games has been shown to be sensitive to even minor changes that compromise anonymity and activate reputational concerns” (pg. 807). They then cite studies (which later studies confirm) that found people behaving more prosocially in the presence of eye images. “In sum,” the authors write, “we are suggesting that activation of God concepts, even outside of reflective awareness, matches the input conditions of an agency detector and, as a result, triggers this hyperactive tendency to infer the presence of an intentional watcher. This sense of being watched then activates reputational concerns, undermines the anonymity of the situation, and, as a result, curbs selfish behavior” (pg. 807-808). In short, religious priming makes us think someone upstairs is watching us. This has more to do with being seen as good.

However, religious priming obviously doesn’t work for the honor code portion. Yet, Shariff and Norenzayan’s other explanation is actually quite helpful in this regard: “the activation of perceptual conceptual representations increases the likelihood of goals, plans, and motor behavior consistent with those representations…Irrespective of any attempt to manage their reputations, subjects may have automatically behaved more generously when these concepts were activated, much as subjects are more likely to interrupt a conversation when the trait construct ‘‘rude’’ is primed, or much as university students walk more slowly when the ‘‘elderly’’ stereotype is activated (Bargh et al., 1996)” (pg. 807). Being primed with the “honorable student” stereotype, students were more likely to behave honorably (or honestly). 

In short, Ariely’s study I think shows a mix of motivations when it comes to behaving morally: (1) maintaining our self-concept as a good person, (2) fear of being caught and having our reputation (and the benefits that come with along with it) damaged, and (3) our susceptibility to outside influence.

My point about moral grandstanding is not that we should interpret all behaviors by politicians through the lens of self-delusion and status seeking. But being aware of it can help us cut through a lot of nonsense and avoid being swept up in a collective self-congratulation. To quote Tosi and Warmke, “thinking about grandstanding is a cause for self-reflection, not a call to arms. An argument against grandstanding shouldn’t be used as a cudgel to attack people who say things we dislike. Rather, it’s an encouragement to reassess why and how we speak to one another about moral and political issues. Are we doing good with our moral talk? Or are we trying to convince others that we are good?” And as philosopher David Schmidtz is said to have quipped, if your main goal is to show that your heart is in the right place, then your heart is not in the right place.

Does Employment Protection Actually Lead to Fewer Jobs?

Image result for low wages jobs

Based on a new analysis of a 2001 Swedish reform, it appears so:

The effect of employment protection legislation (EPL) on employment is theoretically ambiguous. Increased firing costs make employers both less prone to dismiss workers and less inclined to hire them, as employers anticipate these potential costs already in their hiring decisions (Bertola, 1999). In accordance with the theoretical prediction, empirical evidence on the overall employment effect is mixed (see, e.g., OECD, 2013, and Skedinger, 2010, for surveys).

…There is ample evidence, based on various types of data and identification strategies, suggesting that stricter EPL indeed hurts the employment prospects of vulnerable groups, like women, youth, immigrants, the low-skilled, and the disabled…Unlike previous work in this field, we focus on the employment prospects of the unemployed and participants in active labor market programs (ALMPs). We examine a reform of seniority rules in Sweden in 2001 that affected small firms only. Seniority rules – or last-in first-out – imply that dismissals should occur in reverse order of seniority…We investigate whether the liberalization of EPL made employers in small firms more willing to hire “wild cards”, with little previous experience. Seniority rules are also likely to increase the average productivity of dismissed workers, thus making unemployment less of a stigma and increasing the hiring rate of unemployed workers, as argued by, e.g., Baumann (2010) and Kugler and Saint-Paul (2004). 

…Our results indicate that the reform increased the share of workers hired from unemployment by 5-10 percent, depending on specification. We obtain mixed results concerning transitions from ALMPs to employment following the reform. The findings suggest an increase in transitions for programs focusing on preparatory training by 5-11 percent. The reform appears to have decreased the share of workers hired from subsidized employment, albeit only for certain firm size categories. No effect is found on transitions from longer unemployment spells to employment. Finally, we note that the increase in the share of workers hired from unemployment and ALMPs seems to be driven primarily by those with some college education (pg. 1-3).

In short, “a less stringent EPL made it easier for employers to allow for more uncertainty regarding the productivity of workers in their hiring decisions” (pg. 14). They note that “the [Swedish] reform may not have been far-reaching enough to have any favorable effect on the employment of the long-term unemployed and those in subsidized jobs, for whom the stigma is arguably more severe. The increase in workers hired from short-term unemployment and preparatory labor market programs may have adversely affected the remainder of the labor market, crowding out the employment of some of the most marginal groups” (pg. 15).

You find similar results with minimum wage hikes. You can protect the (slightly) higher-paying jobs of the already employed at the expense of the lower-skilled, lower-educated unemployed or you can make lower-paying jobs more accessible to the most vulnerable. 

Are the Rich Getting Richer and the Poor Getting Poorer?

With yet another Oxfam report out, Swedish author Johan Norberg felt the obligation to point out its deficiencies:

There are two rules to stick to when someone reports that the rich are getting richer and the poor poorer. The first is to check the source. The second is that if the track shows that the information comes from OXFAM, you can throw it in the trash. Few organizations have such a consistent habit of misleading about the world’s prosperity.

The fact is that poverty is decreasing dramatically regardless of the degree of poverty that is used. According to the UN and World Bank’s measures of extreme poverty, it has fallen from 18.1 to 8.6% between 2008 and 2018. It is the biggest economic lift in history.

So how can Oxfam get it to the poor become poorer? Firstly, they ignore the income and consumption, and count only financial assets, which the poor rarely have – often they do not even have a bank account. And although some have it, there will not be much left in total when you deduct all the debts they have from this amount.

It enables OXFAM every year to shock journalists by saying that a single billionaire owns more than two billion people together. The problem with the reasoning is just that my daughter – who owns about 500 kronor – owns more than two billion people together, because these two billions do not have any net financial assets at all.

Or, as he said on Twitter a couple years ago:

Norberg then cites some recent research on global earnings inequality. The researchers explain,

We focus exclusively on labour earnings, which is the main income source for the vast majority of the world’s population (Hammar and Waldenström 2017). We create the first estimates of global earnings inequality, its trend between 1970 and 2015, and some evidence on its main drivers.

The estimation of the global earnings inequality rests on a unique earnings survey database run by UBS, a Swiss bank. It contains data on earnings, taxes, working hours, and local prices for workers in 15 representative occupations. The data have been collected in the same way every third year since 1970, in up to 85 cities in 66 countries, in all the world’s continents. We match it with occupational and country population data from the ILO and the World Bank. Our balanced sample covers more than 80% of the global population, and correlates well with statistics from other sources. It should be noted that the tails of the distribution are not well covered in our data, but imputations from other sources (top incomes from the World Wealth and Income Database, for example) suggest only a modest impact on the global earnings inequality trend.

Figure 1 [below] shows the main result – that global earnings inequality was very high in 1970 (with a Gini coefficient of around 70), but has fallen to a lower level today (around 60). The main equalisation occurred in the late 1990s and 2000s. Global pre-tax inequality is higher than global post-tax inequality (approximately 3 Gini points), and inequality is higher for hourly wages than for yearly earnings (approximately 1 percentage point). The latter suggests a negative relationship between earnings and hours worked at the global level. Compared with earlier studies on global inequality in income or consumption, we find that inequality in earnings and wages is slightly lower, but follows a similar trend.

Figure 1

They continue,

Decomposing the global earnings inequality trend within and between countries, we find that within-country inequality rose over this period (by 5 Gini points), while between-country inequality fell (by 15 points), leading to the combined effect of a 10-point fall in total earnings inequality. In Figure 3, we can also see that the main shift in both of these trends took place at almost the same time, during the early years of the 21st century. We also find that inequality within occupations has fallen, especially within the traded, industrial sector. This suggests that globalisation could be a potential driver of this earnings convergence trend.

They conclude,

Our new evidence on global earnings and wage inequality shows a falling trend over the past half-century. Similar to previous findings for global household income inequality, the main equalisation period was the late 1990s and 2000s. At this time several large, developing economies experienced high growth rates. Higher earnings in the agricultural sector, but also some low-skill urban professions, contributed specifically to this trend.

Once again, things are getting better.

Do Immigrants Decrease Economic Freedom?

Image result for immigrants mexican

In my BYU Studies Quarterly article last year, I wrote,

Another objection [to increased immigration] is what is known as the “epidemiological case,” which argues that immigrants may bring with them foreign values that undermine the culture and institutions of the host country. In essence, immigrants transmit to rich countries those elements that make their source countries poor. What makes this rather prejudiced argument all the more jarring is the fact that it has virtually no supporting evidence. Unfortunately, very little empirical research has been conducted exploring the impact of immigrants on cultural, political, and economic institutions at all. However, the research that is available should calm fears and actually provide reasons for optimism. For example, there is no association between growth of total-factor productivity (TFP) in rich countries and the ratio of migrants from low-income countries, indicating that migrants do not “contaminate” their new homes with the low productivity of their source countries.

The Canada-based Fraser Institute publishes its oft-cited Economic Freedom of the World report annually. Its indicator—known as the Economic Freedom of the World (EFW) Index—defines economic freedom based on five major areas: (1) size of the government, (2) legal system and the security of property rights, (3) stability of the currency, (4) freedom to trade internationally, and (5) regulation of labor, credit, and business. According to the institute’s most recent report (which looks at data from 2015), countries with more economic freedom had considerably higher per-capita incomes and economic growth. Relying on this index, a 2015 study found that a larger immigration population marginally increases the economic freedom of the host country’s institutions. No negative impacts on economic freedom were found. Several authors from this study looked at Israel during the 1990s as a natural experiment in mass migration. During the 1990s, Israel’s population grew by 20 percent due to immigrants from the former Soviet Union. Yet, instead of experiencing decline, Israel shot up “from 15% below the global average [in economic freedom] to 12% above it and improv[ed] its ranking among countries by 47 places.” Similarly, a 2017 study found that higher diversity—measured by levels of ethnolinguistic and cultural fractionalization—predicts higher levels of economic freedom. While this particular study mainly discusses development economics, the correlation between high diversity and high economic freedom is an important aspect of the immigration debate. Barring members of different ethnolinguistic groups from entering the country may actually be holding back economic development (pg. 95-97).

Research on Jordan provides further evidence for the position above. Another 2018 study piles on. Overall, the authors’ 

results don’t show any strong relationship between increases in immigration and less economic freedom, nor do they show any strong relationship between an increase in the share of naturalized US citizens and less economic freedom. Therefore, our results indicate that, so far, Borjas’s concerns about a deterioration in the quality of institutions following an increase in immigration are not supported by the empirical results as they apply to the US states (pg. 394).

There were mixed results when it came to minimum wage legislation and union density. In the cases where the effects are slightly negative, the authors explain,

In states with larger immigrant population shares, are the increases in minimum wages and union densities the result of immigrants pushing for higher minimum wages and joining unions at higher rates than native-born individuals (because immigrants’ wages tend to be lower than natives’ wages)? Or are they the result of native-born individuals unionizing and pushing for higher minimum wages as a way of pricing out and restricting immigrant labor market supply? It could be explained either way and both explanations probably operate. However, our results don’t necessarily indicate whether the negative impact on labor market freedom is coming more from immigrants or more from native-born citizens. Therefore, when we study the relationship between immigration and economic freedom, the results don’t tell us much about the direct impact immigrants may have (pg. 376).

If you think the only way to “Make America Great Again” is by keeping out foreigners in the name of protecting our institutions, you need to chillax. 

Doing Business 2019

The World Bank’s latest Doing Business report is out (check out the last couple years). The report “measures regulations affecting 11 areas of the life of a business. Ten of these areas are included in this year’s ranking on the ease of doing business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures labor market regulation, which is not included in this year’s ranking.” 

It’s key findings are as follows:

  • Doing Business captured a record 314 regulatory reforms between June 2, 2017, and May 1, 2018. Worldwide, 128 economies introduced substantial regulatory improvements making it easier to do business in all areas measured by Doing Business.
  • The economies with the most notable improvement in Doing Business 2019 are Afghanistan, Djibouti, China, Azerbaijan, India, Togo, Kenya, Côte d’Ivoire, Turkey and Rwanda.
  • One-third of all business regulatory reforms recorded by Doing Business 2019 were in the economies of Sub-Saharan Africa. With a total of 107 reforms,  Sub-Saharan Africa once again has a record number this year.
  • The BRIC economies—Brazil, the Russian Federation, India and China—introduced a total of 21 reforms, with getting electricity and trading across borders the most common areas of improvement.
  • The 10 top economies in the ease of doing business ranking share common features of regulatory efficiency and quality, including mandatory inspections during construction, automated tools used by distribution utilities to restore service during power outages, strong safeguards available to creditors in insolvency proceedings and automated specialized commercial courts.
  • Training opportunities for service providers and users are positively associated with the ease of doing business score. Similarly, increased public-private communication on legislative changes and processes affecting SMEs are associated with more reforms and better performance on the Doing Business indicators.

 

The World Bank notes, “The most popular reform is making it easier to start a business. More than a quarter of economies did just that in 2017/18. It now takes an average of 20 days and costs 23% of income per capita to start a business, compared to 47 days and 76% of income per capita in 2006. Thirteen of the top 20 economies have at least one procedure that can be completed online in half a day.”

Check it out.

Does Globalization Increase Economic Mobility?

A new working paper draws on Swedish manufacturing data between 1997 and 2013 to determine the effects of globalization on economic mobility. Defining globalization as “a reduction in trade costs” (pg. 22), the authors note,

Most workers land their first full-time job in their 20s and then spend 40 to 50 years in the labor market trying to earn a living. Over their careers, workers acquire new skills, which enables them to change jobs and (sometimes) occupations in order to increase job satisfaction and career earnings. It follows that a complete picture of the impact of globalization on a typical worker should take into account its impact on skill acquisition and the rate at which workers are able to secure better jobs (that is, economic mobility) (pg. 38).

The authors develop “a model of a jobs ladder in which workers gain skills on the job that qualify them for higher-paying jobs at more productive firms” (pg. 38). They explain,

Our main finding is that when trade costs are initially high, globalization increases economic mobility through two channels. First, the reduction in trade costs leads to more international engagement by firms. As the number of exporting firms grows, the ability of workers to gain skills that reduce trade costs is enhanced. This makes it easier for workers to qualify for jobs at the top of the jobs ladder. Second, since high-productivity firms gain disproportionally from falling trade costs, globalization increases wage inequality. And, as the gaps between the wages paid by different groups of firms increase, workers become more willing to (a) incur the moving costs associated with changing jobs and (b) expend effort to keep their skills from deteriorating. As a result, upward economic mobility rises and downward economic mobility (due to demotions or terminations) falls. These changes in economic mobility reduce the differences in expected lifetime incomes forecast by workers in high-wage and low-wage jobs, resulting in the possibility that inequality in lifetime incomes might fall with globalization (even though wage inequality is rising). Even the case in which globalization increases inequality in terms of lifetime incomes, the impact is smaller than its impact on wage inequality (pg. 39).

What’s more,

Employment is reallocated from firms that pay medium wage towards the extremes, with high-wage and low-wage employment both increasing. While it is tempting to interpret this reallocation of employment as an explanation of “job polarization” as described in recent empirical work (see Goos and Manning 2007; Goos, Manning, and Salomons 2009; Autor, Katz and Kearney 2006, 2008 and Autor and Dorn 2013), we believe that would be a mistake…Our results indicate that globalization can result in a shrinking middle-class within a given occupation, with increased export opportunities resulting in more firms willing to recruit the most experienced workers by paying the highest wage; while others react to increased competition from imports by re-orienting their hiring toward inexperienced low-wage workers. These results are not driven by outsourcing. Instead, they are completely driven by the manner in which globalization alters the networks that firms use to fill their vacancies (pg. 39-40).

This image has an empty alt attribute; its file name is employment-shares.jpg

When trade costs are high, “globalization allows [low-wage workers] to move up the jobs ladder more quickly and, as they reach higher and higher rungs, they enjoy the enhanced benefits of the higher real wages generated by freer trade. In this case, a focus on wage inequality can be misleading in that low-wage workers do not lose as much relative to others in the labor market as would be indicated by standard analysis” (pg. 28-29). However, when trade costs are already low, “[w]age inequality rises and the rate at which workers move
out of their entry level jobs slows.” However,

the proper way to measure the effect of globalization on a worker is to examine its impact on that worker’s expected lifetime real income. That measure considers both the change in real wages and the degree of economic mobility faced by that worker. Thus, we can get a better view of how globalization affects inequality by examining the changes in expected lifetime real incomes for workers in different labor market states…Inexperienced workers only hold low-wage jobs for a portion of their lifetime, moving on to much better jobs as they gain skills. As they mature, they benefit from the higher real wages paid to medium-wage and high-wage production workers if they can gain the proper skills and land better jobs. The fact that using current wages as a proxy for lifetime earnings can lead to misleading conclusions is not a new insight. This issue is well understood and heavily researched in many sub-fields of economics; but, as far as we know, it has not received much attention from those investigating the link between globalization and inequality (pg. 29-30).

This image has an empty alt attribute; its file name is inequality.jpg

The devil is in the details.

The Effects of Legalizing Immigrants

Image result for spain immigration

Over at SMU’s Texas-Mexico Center blog, I wrote,

Despite the recent political rhetoric and anti-immigrant sentiments, the economic benefits of immigration are well-established in the empirical literature. A 2011 meta-analysis by economist Michael Clemens found that dropping all current immigration restrictions would result in a doubling of world GDP.

A more recent analysis corroborated these findings, concluding that lifting all migration restrictions would increase world output by 126%. In 2015, migrants made up 3.4% of the world population yet contributed about $6.7 trillion to global output—9.4% of world GDP. The McKinsey Global Institute estimates that this is $3 trillion more than these migrants would have produced had they stayed in their origin countries. Even undocumented workers in the United States contribute about 3.6% of private-sector GDP annually—around $6 trillion dollars over a 10-year period. Granting these migrants legal status would increase their contribution to 4.8%. 

On this last point, a recent study explores the effects of immigrant legalization in Spain. The authors explain the background for the natural experiment:

In the early 2000s, Spain experienced an incredible boom in immigration. The share of immigrants in the working-age population increased from less than 2% in 1995 to around 10% in 2004. Many of these newly arrived immigrants lacked work permits. By 2004, there were close to 1 million undocumented immigrants in a country of around 43 million inhabitants.

Despite this large number of undocumented immigrants, the government at the time, led by Jose Maria Aznar (Popular Party) and with Mariano Rajoy in its cabinet, was unlikely to legalise the work status of immigrants. Traditionally, the Popular Party had been proposing tougher policies against immigration. Its main stance was to avoid implementing policies that could attract new waves of immigrants. In this context, in the early 2000s, immigrants were granted work permits mostly on the basis of family reunification.

On 14 March 2004, voters in the Spanish general election had to determine whether the Popular Party would continue in power or be replaced by the Socialist Party. In the week before the election, the outcome seemed clear: the polls were forecasting that Zapatero of the Socialist Party was trailing Rajoy by seven percentage points. 

Yet, something completely unexpected happened just three days before the election which, as shown by Garcia-Montalvo (2011), changed the final outcome: Madrid suffered the largest terrorist attack in Spanish history, a tragedy that was poorly managed by the Popular Party. As a result, the Socialist Party came to power, and one of the first policies it implemented was the legalisation of nearly 600,000 immigrants already living (and working illegally) in Spain.

Using administrative payroll tax revenues, the authors find

that the legalisation of immigrants’ work status increased revenues locally — i.e. at the province level — by around €4,189 per newly legalised immigrant. This amount is only 55% of what we would have expected if newly legalised immigrants had shared the same characteristics as previous contributors to the social security system and had enjoyed similar labour market experiences. Two factors may explain this. First, newly legalised immigrants were perhaps disproportionately low-skilled and had worse labour market experiences than natives. Second, the legalisation may also have affected previous workers.

…Using very detailed administrative and survey data on wages and employment, we show that the policy change disproportionately affected the labour market outcomes of workers in high-immigrant locations relative to low-immigrant locations. In particular, it worsened employment opportunities for both low-skilled natives and immigrants, while it improved them for high-skilled workers. Among low-skilled natives, those who lost their jobs were negatively selected — the policy change negatively affected employment prospects of native low-skilled workers at the bottom of the wage distribution. Putting together all the labour market changes and comparing them to payroll tax revenue changes, we show that this negative selection is crucial to fully understand the effects of the reform.

We also show that, following the reform, many immigrants moved from high- to low-immigrant locations. This is important since these immigrants also contributed to payroll tax revenues, but in traditionally low-immigrant locations. This, in turn, means that comparing local payroll tax revenues in high- relative to low-immigrant locations to evaluate the effect of the policy may underestimate the true impact of immigrant legalisation on payroll tax revenues. Once we take into account internal migration and selection, we argue that the true contribution was almost €5,000 per newly legalised immigrant, i.e. substantially higher than what we would have been able to estimate on the basis of local tax revenue data alone.

Are Tech Companies Responsible for Harassment on their Platforms?

Ibrahim.ID [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

So far the answer to that question is — No. According to a 1996 law that was originally passed to protect free speech, companies are not liable for speech on their online platforms — including harassment.

After repeated harassment and a restraining order against the dating app Grindr, one man is trying to change that. Matthew Herrick’s ex repeatedly created fake profiles of Herrick, sending men to his workplace and home expecting to hookup. The harassment continued even though the ex was not following Grindr’s terms of service, and Herrick got a restraining order against Grindr in which they were to take down all the fake accounts.  In 2017, Herrick filed a lawsuit against Grindr.

Grindr and other tech groups and companies are relying on the 1996 law to say they are not responsible for third party speech on their platforms.  Herrick’s attorney has turned towards product liability laws — saying Grindr is dangerous and built specifically to allow such harassment.

So, is Grindr responsible for the repeated harassment? Or do apps not harass people, people harass people?  Or is it something in between: should a person have legal recourse if a company doesn’t stick to its TOS?