If you are in DC the week after next on May 29, this looks very useful:
Economic Policy Institute forum.... Breakfast & Registration: 10:00 - 10:30 AM. Presentations & Discussion: 10:30 AM - 12:30 PM. Book signing: 12:30 - 1:00 PM
Moderator: Louis Uchitelle, The New York Times...
Panelists:
Jacob Hacker, Professor of Political Science, Yale University, Institution for Social and Policy Studies; Elisabeth Jacobs: Fellow, Harvard University, Multidisciplinary Program on Inequality & Social Policy. Hacker and Jacobs will present and discuss their new study: "The Rising Instability of American Family Incomes, 1969-2004."
Peter Gosselin, Los Angeles Times. Gosselin will discuss his new book, High Wire. The Precarious Financial Lives of American Families (Basic Books, June 2, 2008) (available for purchase and signing at event).
Discussant: Brink Lindsey, Cato Institute. Author of The Age of Abundance: How Prosperity Transformed America's Politics and Culture. (Collins)
Economic Policy Institute
1333 H Street, NW
East Tower, Suite 300
Washington, DC 20005
I just dropped the Fifteen-Year-Old off at her Local Public High School for her practice 生員 (shēngyuán) exam, her net step in qualifying for the imperial bureaucracy so necessary to give her options to choose a life that she really wants to live in our society. She won't necessarily ace this particular exam--unlike her brother, who was a shoe-in for 案首 status...
Excuse me. Wrong branch of the multiverse. Let me retune my set and focus in on this reality...
Ah. There we are...
Ahem...
I just dropped the Fifteen-Year-Old off at her Local Public High School for her practice standardized test, her next step in attaining the "meritocracy" so necessary to give her the options to choose a life that she really wants to live in our society. She won't necessarily ace this particular exam--AP World History--unlike her brother, who was a shoe-in for a 5. Her turn will come next year with AP Calculus AB--she has more of a pattern-seeing while he has more of an applicable-fact-nugget recalling mind. But both of them are, if I may boast as a father, very kind and thoughtful teenagers and scary-smart in their respective ways--and I say this as somebody who was once the best high school math student in all of Washington DC. (Which may not be saying that much: I learned the next year in my corner of the Weld dormitory that the best high school math student in all of Washington DC was about equal to someone who had been "undistinguished" in math at Moscow Science-Mathematics High School #2--who said his best subject was English. And then there were the stars of Math 55... people like Seth Lloyd... who can only be described as "transhuman"... intelligences vast, warm, and sympathetic... but I digress...)
She is not a shoe-in for a 5 because (a) her world history class was not an AP class, and (b) she does not have the single-minded focus on history, politics, and current events in her outside reading necessary to ensure a 5 in the absence of having covered the AP syllabus in her course. But she has a good shot. And, most important, practice makes perfect. To have done this before when it comes time to take a standardized test where it really counts is an important edge--one of the rules that is not written down anywhere. (One of the rules, moreover, that Princeton has done its best to hide via false fake propaganda for generations about how some of its tests are not achievement but instead "aptitude" tests.)
We economists have been staring in stupefaction and horror over the past generation as the college-high school wage premium in America has risen from 30% to 90% with little if any visible increase in college attendance rates. Incentives do not appear to be having the result in terms of increasing the supply of the educationally-skilled that we economists believe the natural order demands that they must have. There are four potential explanations:
Myopia--the (growing) up front, cash costs of college and the resulting debt incurred loom much larger in individuals' calculations than they should.
Aptitude--the ability to reap the economic gains we economists attribute to a modern American college education is in fact much more narrowly concentrated than we economists believe, because of how people's brains grew when they were young. Thus the marginal college student reaps no long-run surplus from attendance.
Fear--individuals falsely fear that the ability to reap the economic gains we economists attribute to a modern American college education is in fact much more narrowly concentrated than we economists believe, because of how people's brains grew when they were young. Thus the marginal college student falsely fears that he or she reaps no long-run surplus from attendance.
People don't know the rules.
I'm not sure what I mean by the last. But here is a first cut:
Back in imperial China, if your parents could afford it, and if you were male, you found a tutor to teach you by studying the Confucian classics. You learned the six arts--music, math, writing, ceremony, equitation and archery--the five studies--strategy, law, geography, agriculture, and taxation--and learned how to write your eight-legged-essays. You passed through 生員 (shēngyuán), 舉人 (jǔrén), and then 進士 (jìnshì). At the end you became part of the landlord-bureaucrat-literary intellectual class that ruled China: collecting taxes, collecting rents, advising the emperor, commanding armies, dispensing justice. Those were the rules.
What do today's Americans--the parents of those who are choosing not to go or not to make a great effort at college--think the rules are today? Back in the 1980s Bruce Springsteen in his concerts used to claim that his parents were still following him around the country, telling him that he could still go to college and become (from his father) a lawyer or (from his mother) an author. They understood the rules--the career strategy of trying to live the life you love by becoming a global rock star is not a realistic one, but there are lots of people to be sued and lots of books, manuals, and pamphlets to be written. How many of the parents of today's American fifteen-year-olds are going to do the same?
Lots of people are going to go see the "Sex and the City" movie this spring. How much does it teach anybody about what these people actually do for a living? They look decorative. They suffer from emotional angst. But Miranda has status and options not because she is decorative and perky with red hair and suffers from emotional angst but because of a nonhuman ability to deal with mind-numbing trivia and an iron butt. Samantha has status and options not because she is decorative, flirty, and... well, actually yes, but also because she has a mind for organizational detail and an ability to instantly direct what needs to be done to solve minor crisis of the day #376. Carrie has status and options not because she is decorative--none of her readers can see her, remember, except on the side of a bus--and suffers from emotional angst but because she is very good at putting the fabric of her life into prose on deadline in a way New York readers find interesting. Charlotte has status and options not because she is decorative and suffers from emotional angst but because she has the right manners, the right connections, and a very good eye for visually interesting art. John James Preston--well, it is never clear what he does at all, is it? He likes jazz. He smokes cigars. Cash is not a constraint at all.
Economic Snapshots: This month’s crop of new college graduates will confront a more inhospitable job market than their predecessors faced in 2001, the beginning of the last recession.... [T]he labor market for recent college graduates (ages 23-29) was weaker in 2007 than before the last recession in 2001. Inflation-adjusted average hourly wages for young college graduates... are still lower by about $0.60 for women and $1.60 for men than they were six years ago... a college degree has become less of a guarantee of receiving health and retirement benefits on the job... college graduates in entry-level jobs... less likely to receive employer-provided health insurance... over 5 percentage points lower than in 2001, and less than half of young college grads now receive any form of pension coverage on the job (see Figure B).
The fact that new college grads are doing poorly is a troubling sign, since those with higher education and more skills required in the new economy... are expected to be faring well...
The anemic response of skill investment to skill premium growth | vox - Research-based policy analysis and commentary from leading economists: The earnings premium for skilled labour has increased dramatically in recent decades. Yet... Americans are not acquiring significantly greater skills in response to this change.... Since 1980, the demand for skilled labour has risen faster than the supply of skills, fuelling a steady increase in the earnings premia found for measures of skills such as schooling or cognitive test scores. The rapid rise in the skill premium represents a substantial increase in the economic incentive to acquire skills.... [B]etween 1980 and 2000 the internal rate of return for completing high school rather than dropping out after tenth grade has increased from approximately 40% to 55%.... How rapidly and how much young adults respond to this increase in the returns to skills and how this response varies across the population have important implications....
In Altonji, Bharadwaj, and Lange (2008), we... look at factors that influence skill acquisition, such as parental education and growing up in a two-parent family... make use of measures of the ease with which young adults transition from schooling into the labour market.... [O]verall the 1997 youth cohort is more skilled than the 1979 cohort... at the median... skill[s]... increased by about 6.5 percent. Is [that]... a behavioural response by youth to the widening skill premium?... [N]o.... [M]embers of the more recent cohort have significantly more educated parents than young people in 1979.... Holding parental education, race and gender, and family structure constant, the supply response to the increase in skill premia between cohorts was small: about 1% on average and about 1.5% at the median.... It seems that very large increases in skill premia are necessary to induce young workers to increase their investments in skills substantially.... This implies that, all else equal, the large degree of earnings inequality observed today is likely to persist far into the 21st century....
[T]he difference in the skills of the 1980 and 2004 youth cohorts is larger at the top of the skill distribution than at the bottom... due to the changing distribution of parental education.... [T]he changing distribution of skills in the population will exacerbate rather than counteract the trend towards increasing earnings disparities....
At this point we can only speculate as to why the response in skills to the increase in skill premia is so small... non-pecuniary costs of skill investments... liquidity constrained... myopic... other reasons... consistent with a number of studies (e.g. Kane (1994), Dynarski (2003)) that find that schooling decisions are quite sensitive to direct costs of schooling and tuition subsidies.... Cunha and Heckman (2007)... [perhaps] parental investment during early childhood shapes the potential to acquire additional skills later in life....
At this point, the question of why the supply response to the increase in the labour market returns to skill has been so small is an open one. In our opinion, it ranks among the most important empirical issues facing labour economists today.
This raises the possibility that the only easy way to reduce market inequality is to greatly increase the supply of the skilled and educated in the long run by making higher education free--which is a very dubious policy on the inequality front, because it starts with a honking huge transfer from the average taxpayer today to the relatively rich well-educated of tomorrow.
Peter Gosselin’s admirable objective is to show how many people of all income levels are now insecure and afraid in an economy that Americans are constantly told, by Republicans and Democrats alike, has long been back on track.... But, in truth, the American economy has not been on track for a generation now....
The main theme of Gosselin, a veteran reporter for the Los Angeles Times, is the rise of deep-seated financial, health and material risk. He gathers the many pieces of the new economic America together quite beautifully, even elegantly, and brings them alive with interesting and not the usually predictable individual examples....
[T]here are the 401(k)s. Gosselin says the major shift in America toward a riskier society regards retirement. Three out of five employees who are fortunate enough to have a private retirement plan now don’t have a pension at all but rather a defined contribution plan like a 401(k).... Many and probably most will save too little and invest unwisely.... But what makes Gosselin so interesting is that he digs further for the pertinent government failures. For example, the Employee Retirement Security Act (ERISA), passed in 1974 originally to protect workers, now, as he writes, protects big companies.... A former insurance consultant told me recently that some employees are paid at insurance companies according to how many claims they can deny. I was shocked. Naive me, and after all these years. Of course, that is how the companies operate. Create incentives to maximize profits.
Gosselin’s central claim is based on some research he did to show that the proportion of American families whose incomes are likely to fall substantially has risen sharply since the 1970s....
Gosselin, however, puts his finger on it. Poverty is not about black-and-white deprivations in the contemporary world. The poor in America live in total chaos... “pay cuts and eviction notices, car troubles and medical crises, hirings and firings--that keeps reversing their families’ advances, rattling their finances, nudging them toward the economic brink.”... What do the poor borrow for? A good restaurant meal? A pair of impossibly expensive sneakers? Maybe, once in a while. But Gosselin looks into a case or two: $170 to fix the steering on the car, a $300 cash advance for the rent, another $1,000 to bring a wife to the U.S. from Central America....
The costs of education, health care, drugs and public investment have gone up much faster than incomes. So people can buy clothes, food or electronics more easily, but they can’t buy health care, or they have to move into an expensive house to get a good k-12 education for the kids.... This is why Barack Obama is right when he talks about bitterness and anger, and why claims that the political attitudes are only about culture shifts is wrong.
Now the experience of the 2000s has brought the message home. Wages haven’t gone up at all in the 2000s, despite record profits and decent productivity growth. Family incomes are down. These are unprecedented in the modern economy.
And all this follows a generation of rising insecurity, uncertainty, unrewarded effort and for many a treadmill of growing despair, cynicism and occasional chaos that this author describes so clearly, even elegantly. Gosselin’s gotten the new American condition better than anyone else I’ve read.
He writes, over at Martin Wolf's place at the Financial Times:
FT.com | The Economists’ Forum | Food crisis is a chance to reform global agriculture: Paul Collier: The sharp increase in the world price of staple foods is an inconvenience for consumers in the rich world, but for consumers in the poorest countries, especially in Africa, it is a catastrophe. Despite the predominance of peasant agriculture, most African countries are net food importers and food accounts for over half of the budget of low-income households. This is the result of decades of agricultural stagnation combined with growing populations. Although many of the net purchasers are rural, evidently the problem is at its most intense in the urban slums. These slums are political powder kegs and so rising food prices have already triggered riots. Indeed, they sow the seeds of an ugly and destructive populist politics.
Why have food prices rocketed? Paradoxically, this squeeze on the poorest has come about as a result of the success of globalization in reducing world poverty. As China develops, helped by its massive exports to our markets, millions of Chinese households have started to eat better. Better means not just more food but more meat, the new luxury. But to produce a kilo of meat takes six kilos of grain. Livestock reared for meat to be consumed in Asia are now eating the grain that would previously have been eaten by the African poor. So what is the remedy?
The best solution to a problem is often not closely related to its cause (a proposition that that might be recognized in the climate change debate). China’s long march to prosperity is something to celebrate. The remedy to high food prices is to increase food supply, something that is entirely feasible. The most realistic way to raise global supply is to replicate the Brazilian model of large, technologically sophisticated agro-companies supplying for the world market. To give one remarkable example, the time between harvesting one crop and planting the next, in effect the downtime for land, has been reduced an astounding thirty minutes. There are still many areas of the world that have good land which could be used far more productively if it was properly managed by large companies. For example, almost 90% of Mozambique’s land, an enormous area, is idle.
Unfortunately, large-scale commercial agriculture is unromantic. We laud the production style of the peasant: environmentally sustainable and human in scale. In respect of manufacturing and services we grew out of this fantasy years ago, but in agriculture it continues to contaminate our policies. In Europe and Japan huge public resources have been devoted to propping up small farms. The best that can be said for these policies is that we can afford them. In Africa, which cannot afford them, development agencies have oriented their entire efforts on agricultural development to peasant style production. As a result, Africa has less large-scale commercial agriculture than it had fifty years ago. Unfortunately, peasant farming is generally not well-suited to innovation and investment: the result has been that African agriculture has fallen further and further behind the advancing productivity frontier of the globalized commercial model. Indeed, during the present phase of high prices the FAO is worried that African peasants are likely to reduce their production because they cannot finance the increased cost of fertilizer inputs. While there are partial solutions to this problem through subsidies and credit schemes, large scale commercial agriculture simply does not face this problem: if output prices rise by more than input prices, production will be expanded because credit lines are well-established.
Our longstanding agricultural romanticism has been compounded by our new-found environmental romanticism. In the United States fears of climate change have been manipulated by shrewd interests to produce grotesquely inefficient subsidies for bio-fuel. Around a third of American grain production has rapidly been diverted into energy production. This switch demonstrates both the superb responsiveness of the market to price signals, and the shameful power of subsidy-hunting lobby groups. Given the depth of anti-Americanism in Europe it is, of course, fashionable to criticize the American folly with bio-fuels. But Europe has its equivalent follies.
First, the European Commission is now imitating the American bio-fuels policy. At present the programme is small enough to be unimportant, but we need to pull it back before it does real damage. We have surely learnt enough about European agriculture to realize how important it is to kill this incipient scam before we are engulfed by it. But the true European equivalent of America’s folly with bio-fuels is the ban on GM. Europe’s distinctive and deep-seated fears of science have been manipulated by the agricultural lobby into yet another form of protectionism. The ban on both the production and import of genetically modified crops has obviously retarded productivity growth in European agriculture: again, the best that can be said of it is that we are rich enough to afford such folly. But Europe is a major agricultural producer, so the cumulative consequence of this reduction in the growth of productivity has most surely rebounded onto world food markets. Further, and most cruelly, as an unintended side-effect the ban has terrified African governments into themselves banning genetic modification in case by growing modified crops they would permanently be shut out of selling to European markets. Africa definitely cannot afford this self-denial. It needs all the help it can possibly get from genetic modification. Not only is Africa currently being hit by rising food prices, over the longer term it will face climatic deterioration in the context of a rapidly growing population.
While the policies needed for the long term have been befuddled by romanticism, the short term global response has been pure beggar-thy-neighbour. It is easier for urban slum dwellers to riot than for farmers: riots need streets, not fields. And so, in the internal tussles between the interests of poor consumers and poor producers, the interests of consumers have prevailed. Governments in grain-exporting countries have swung prices in favour of their consumers and against their farmers by banning exports. These responses further politicize and fragment an already confused global food market. They increase the risks of investing in commercial-scale food production and drive up prices further in the food-importing countries. Unfortunately, trade in agriculture has been the main economic activity to have resisted being subject to global rules. We need stronger and fairer globalization, not less of it.
Jim Hamilton has some smart things to say about food riots and U.S. agricultural and energy policy:
Econbrowser: Food prices: How should a well-fed American react when some of the world's poorest citizens in Haiti and Bangladesh riot over the rising price of food? be sure, there are many factors influencing food prices. But to me it's natural to begin with the element that represents a deliberate policy choice on the part of the United States. I refer to America's decision to divert a significant part of our agricultural production for purposes of creating a fuel additive for motor vehicles. USDA Chief Economist Joseph Glauber predicts that 4.1 billion bushels, or 31% of the entire U.S. corn crop, will be devoted to ethanol production for the 2008/09 season.
On one level, the question of whether it is morally acceptable for us to divert the food that might have fed the hungry for purposes of driving our SUVs is no different from similar questions about any of a number of other details of how the well-off dispose of their wealth. But I'm thinking that the profound inefficiencies associated with this particular disposition of resources may also be relevant. As a result of ethanol subsidies and mandates, the dollar value of what we ourselves throw away in order to produce fuel in this fashion could be 50% greater than the value of the fuel itself. In other words, we could have more food for the Haitians, more fuel for us, and still have something left over for your other favorite cause, if we were simply to use our existing resources more wisely.
We have adopted this policy not because we want to drive our cars, but because our elected officials perceive a greater reward from generating a windfall for American farmers. But the food price increases are now biting ordinary Americans as well. That could make those political calculations change, and may present be an opportunity for a nimble politician to demonstrate a bit of real leadership. I notice, for example, that although Senator Barack Obama (D-IL) was among those who voted in favor of the monstrous 2005 Energy Bill that began these mandates, Hillary Clinton (D-NY) and John McCain (R-AZ) were among the 26 senators who bravely voted against it.
Wouldn't it be refreshing if one of them actually tried to make this a campaign issue?
March 07, 2008 Free Trade and Fair Trade: SIEPR 2008 Economic Summit Conference
J. Bradford DeLong
The question of "free" versus "fair" trade, has three baskets: an environmental regulation basket, a labor-standards and freedom basket, and a "wages basket."
The first two can, I think, be disposed of quickly. We don't want those able to bribe governments in other countries to poison people or the globe by turning other countries into pollution havens. We don't want environmental standards to be used to freeze the world distribution of wealth and keep people in other countries hungry, illiterate, and barefoot. The difficulties that remain are those of implementation.
Similarly, we want expanding trade to be a force for opportunity rather than for oppression: we like it when expanded trade gives ordinary people a path to a better life; we don't like it when expanded trade gives rich and powerful people in the cloud city of Stratos an incentive to round others up and put them to work in the xenite mines. As then-Principal Deputy IMF Managing Director Stanley Fischer warned the great and good at the 2000 Federal Reserve Bank of Kansas City's Jackson Hole Conference, there is nothing in the ILO's principles that we cannot and very little that we should not be eager to endorse, all of us. The difficulties that remain are, once again, those of implementation.
The question of trade and wages remains: To what extent are rich countries obligated to open their markets to poor countries when the consequence is falling wages for the poor in the rich--bearing in mind that the poor in the rich are often wealthier and have more opporunity than the rich in the poor? To what extent do rich countries do themselves well--serve their national interest--by opening their markets to poor countries even when the consequence is falling wages for the poor in the rich?
Let me make four remarks on this "trade and wages" basket:
First, between 1950 and 1997 trade and wages weren't an issue: our foreign trading partners raised their own relative wage levels at least as fast as globalization enhanced their influence, and there was no net effect of trade on wages--no link from greater openness to the global economy to greater inequality here at home.
Second, at times between 1950 and 1997 trade and wages became a political issue as a way of distracting attention from true problems. The voters of Michigan in 1985 did not want to hear that the problems of Michigan's manufacturing industries were home-grown--in the fecklessness of management and in the Reagan administration's budget deficits that pushed up interest rates which pushed up the value of the dollar and made the goods they made uncompetitive on world markets. They wanted, instead, to hear that the Japanese were doing something clever and illegitimate.
Third: since 1997 or so the link between expanded imports and wage inequality has become real, as our imports now embody a much larger amount of factors competing with our own lesser-skilled than they used to. How large? I don't think we know. Paul Krugman is now writing a paper for the Brookings Institution in which he essentially throws up his hands at the question. But there are two points worth noting: (a) the effects of trade on pre-tax wage inequality are much smaller than the effects over the past generation of changes in the tax system on after-tax income inequality; (b) the effects of trade on inequality of opportunity are much less than the effects of educational inequities on inequality of opportunity.
Fourth, to the extent that we in the United States begin thinking of trade restrictions as a way to fight inequality, we are setting ourselves up for extraordinary trouble late in this century--extraordinary damage to our long-run national security.
Think of it this way: Consider a world that contains one country that is a true superpower. It is preeminent--economically, technologically, politically, culturally, and militarily. But it lies at the east edge of a vast ocean. And across the ocean is another country--a country with more resources in the long-run, a country that looks likely to in the end supplant the current superpower. What should the superpower's long-run national security strategy be?
I think the answer is clear: if possible, the current superpower should embrace its possible successor. It should bind it as closely as possible with ties of blood, commerce, and culture--so that should the emerging superpower come to its full strength, it will to as great an extent possible share the world view of and regard itself as part of the same civilization as its predecessor: Romans to their Greeks.
In 1877, the rising superpower to the west across the ocean was the United States. The preeminent superpower was Britain. Today the preeminent superpower is the United States. The rising superpower to the west across the ocean is China. that was the rising superpower across the ocean to the west of the world's industrial and military leader. Today it is China.
Throughout the twentieth century it has been greatly to Britain's economic benefit that America has regarded it as a trading partner--a source of opportunities--rather than a politico-military-industrial competitor to be isolated and squashed. And in 1917 and again in 1941 it was to Britain's immeasurable benefit--its veruy soul was on the line--that America regarded it as a friend and an ally rather than as a competitor and an enemy. A world run by those whom de Gaulle called les Anglo-Saxons is a much more comfortable world for Britain than the other possibility--the world in which Europe were run by Adolf Hitler's Saxon-Saxons.
There is a good chance that China is now on the same path to world preeminence that America walked 130 years ago. Come 2047 and again in 2071 and in the years after 2075, America is going to need China. There is nothing more dangerous for America's future national security, nothing more destructive to America's future prosperity, than for Chinese schoolchildren to be taught in 2047 and 2071 and in the years after 2075 that America tried to keep the Chinese as poor as possible for as long as possible.
And let me stop there.
2008 SIEPR Economic Summit: Critical Issue Sessions and Panelists:
March 7: 4:30-5:45pm: Session II: Is Free Trade Fair Trade?
* Moderator: Dixon Doll, SIEPR Board member
* Brad DeLong, Professor of Economics, University of California, Berkeley
* Alan Taylor, Professor of Economics, University of California, Davis
* David Dollar, Country Director, China and Mongolia, World Bank
Frances C. Arrillaga Alumni Center, 326 Galvez St., Stanford Campus
Critical Issue Sessions and Panelists: March 7: 4:30-5:45pm....
Session II: Is Free Trade Fair Trade?
* Moderator: Dixon Doll, SIEPR Board member
* Brad DeLong, Professor of Economics, University of California, Berkeley
* Alan Taylor, Professor of Economics, University of California, Davis
* David Dollar, Country Director, China and Mongolia, World Bank
Paul Krugman (2008), "Trade and Wages, Reconsidered": [T]he change illustrated in Figure 15 seems to resemble the actual change in North-South trade since the early 1990s.... The share of advanced
country GDP spent on imports from developing countries rises sharply, because components are shipped to developing countries for assembly, and the assembled goods are then exported back tothe first world.... [T]he actual effects on workers in the advanced economy would reflect a sort of Stolper-Samuelson effect: the real wages of... unskilled workers would fall.... outsourc[ing] labor-intensive industry segments to the third world would depress the demand for less-skilled workers, a shock not captured by data that lumped labor-intensive assembly operations together with skill-intensive component manufacture [in the same industry]....
[N]ote, however, that this example does suggest that the type of calculation performed by Bivens (2007), in which the distributional effects of trade are assumed to be essentially proportional to the import share... may exaggerate the distributional effects of recent trade growth. In this example, the trade share grows fourfold, but the distributional effects do not grow in proportion.... [M]uch of the
content of the new imports from developing countries is actually skill-intensive production from advanced countries.... If the United States imports computers from China, and China assembles computers largely from components made in Japan, only the assembly share of the sales price reflects labor-intensive imports....
Nonetheless... the rapid rise in manufactures imports from developing countries probably is, indeed, a force for growing inequality... factor content calculations suggesting otherwise are missing the essence of what is happening....
What really comes through from the analysis here, however, is the extent to which the changing nature of world trade has outpaced our ability to engage in secure quantitative analysis--even though this paper sets to one side the growth in service outsourcing.... Plain old trade in physical goods has become remarkably exotic. In particular, the surge in developing-country exports of manufactures involves a peculiar concentration on apparently sophisticated products, which seems at first to put worries about distributional effects to rest. Yet there is good reason to believe that the apparent sophistication of developing country exports is, in reality, largely a statistical illusion, created by the phenomenon of vertical specialization....
How can we quantify the actual effect of rising trade on wages? The answer, given the current state of the data, is that we can’t... [I]t’s likely that the rapid growth of trade since the early 1990s has had significant distributional effects. To put numbers to these effects, however, we need a much better understanding of the increasingly fine-grained nature of international specialization and trade.
The Politics of Trade in Ohio: Now come Mr. Obama and Mrs. Clinton... tough talk about foreign trade... you'd have to conclude that they believe that Nafta and other trade agreements have caused Ohio's huge economic problems.
"She says speeches don't put food on the table," Mr. Obama said in Youngstown. "You know what? Nafta didn't put food on the table, either." Later, he went further, claiming that Ohio's workers have "watched job after job after job disappear because of bad trade deals like Nafta."
Mrs. Clinton's advisers, meanwhile, have been putting out the word that she tried to persuade her husband not to support Nafta -- which liberalized trade with Mexico and Canada -- when he was running for president....
[However, n]either candidate calls for a repeal of Nafta, or anything close to it. Both instead want to tinker with the bureaucratic innards of the agreement.... They call the country's trade policy a disaster, and yet their plan to fix it starts with, um, cracking down on Mexican pollution....
The first problem with what the candidates have been saying is that Ohio's troubles haven't really been caused by trade agreements. When Nafta took effect on Jan. 1, 1994, Ohio had 990,000 manufacturing jobs. Two years later, it had 1.03 million. The number remained above one million for the rest of the 1990s, before plummeting in this decade to just 775,000 today. It's hard to look at this history and conclude Nafta is the villain. In fact, Nafta did little to reduce tariffs on Mexican manufacturers, notes Matthew Slaughter, a Dartmouth economist. Those tariffs were already low before the agreement was signed.
A more important cause of Ohio's jobs exodus is the rise of China, India and the old Soviet bloc, which has brought hundreds of millions of workers into the global economy.... [Y]our credit card's customer service center isn't in Ireland because of a new trade deal. All this global competition has brought some big benefits, too. Consider that cars, furniture, clothing, computers and televisions -- which are all subject to global competition -- have become more affordable, relative to everything else. Medical care, movie tickets and college tuition -- all protected from such competition -- have become more expensive.
So what can be done for Ohio?
There is actually a fair amount of agreement among economists on this question. The solution should involve more government investment in infrastructure, the medical sciences, alternative energy and other areas that could produce good new jobs. A more strategic approach to investment, one less based on the whims of individual members of Congress, would also help....
Over the last week, the candidates' talk has, at times, been silly and even inaccurate. And Ohio's problems would certainly be easier to solve if, as Luis Proenza, president of the University of Akron put it, the candidates were "more true to reality and less prone to invective." But the larger problem is that Ohio%u2019s voters have good reason to be angry. For years, they have been promised that globalization was making the United States a richer country. They're still waiting for their share of the bounty.
...the bits of data I'd give the Senator tomorrow would probably include the following:
Home forclosures rose 68 percent in November from the previous November.... Because the US savings rate is so low, people have been relying on their houses as a source of wealth and equity. When adjustable rate mortgages reset, wages remained relatively stagnant, and other costs (like healthcare) continued to rise, people lost their houses. That's a financial and emotional hit that most people won't ever forget.
[Editorial intrusion: foreclosures have risen from a rate of 1.5 million a year last year--about 2.5% of homes being foreclosed upon in a year--to 2.5 milliion a year--about 4% of homes being foreclosed upon in a year--this year. Mortgage resets are proceeding at a pace of about 2 million a year.]
20 million Americans will use credit cards to pay for home heating this winter. This is obviously a double-whammy. Energy costs are up - frankly, due to demand more than anything else - and people don't have the available cash to make up the difference. This cash flow issue (probably caused by higher mortgage and rent costs, higher health care costs, and stagnant wages) will effectively increase home heating costs by up to 20 percent when you consider interest carried over a few months...
More Americans will have catastrophic health expenses in 2008. Nearly 1 in 4 Americans under the age of 65 live in a family that will spend more than 10 percent of that family's pre-tax income on health expenses. More than 80 percent of these people have health insurance. This sounds like a health statistic, but it's unquestionably an "economic indicator" in my book...
[The better statistic for the senator, I think, is "17.8 million non-elderly Americans—-more than three-quarters of whom have health insurance—-are in families that will spend more than 25 percent of their pre-tax income on health care costs in 2008.]
It is an old question: why does America regard itself as a land of upward mobility and opportunity when it does not seem to be the case, relative to western European countries?
Clive Crook (November 29, 2007) - Opportunity and equality: [T]he most surprising evidence on economic mobility compares the United States with other countries. The findings do not give strong support to the idea that America is the land of opportunity. Movement out of the top and bottom quintiles is lower than in many other countries, including Canada and (maybe) Britain. Yes, there is opportunity, and people do move up--but not as readily (out of the lowest quintile, anyway) as elsewhere...
Some of what may be going on is that America is--or has been--relatively welcoming to immigrants. Immigration is all by itself an enormous upward mobility event. And that is not factored into the standard transition matrix analyses.
Crooked Timber » » Help a Blogger Out: Gary Farber has been scraping by for a while on your previous generous donations, CT readers, but he’s in a world of hurt at the moment, so show some love.
In perhaps related news, some people just don’t know anything about being broke:
“The risk is that you could be modifying loans for people who don’t need it,” said Sharon Greenberg, director of mortgage strategy at Barclay’s. “There’s only so much you can do without talking to the borrower. You’re spending $60 a month on cable TV; can you get by with less? You’re spending $200 a month on food for two people, but food costs in your area show that you should be able to get by with $100 a month. These are the kinds of conversations that loan-servicing companies have to have with borrowers.”
Food costs in your area show that when there are no crawdads, you should be able to eat sand. No refinancing for you, Mr. Moneypants McRichington!!
Alas, Celia Dugger doesn't tell us (a) how large Malawi's fertilizer subsidies are, or (b) who pays for them. So it's very hard to assess what is going on.
He tackle's Barone's claim that "maybe" the fall in social mobility in America is due to the fact that a high IQ genetic elite has risen to the top of the fair meritocracy that is our society. And Mark's head explodes:
Michael Barone: [P]olls show that Americans think their chances of moving up are better than a generation ago. Statistics tell a different story: There is a higher correlation today between parents' and children's income than in the 1980s, and the income gap between college graduates and non-graduated doubled between 1979 and 1997.
"America," concludes Parker, "is becoming a stratified society based on education: a meritocracy."... [This] is exactly what Richard Herrnstein and Charles Murray predicted for America in their controversial book The Bell Curve, published 11 years ago. Herrnstein and Murray noted that intelligence is both measurable and in some large but unquantifiable part hereditary, an unexceptionable finding for experimental psychologists but maddening to social engineers. As college education becomes open to all with the requisite intelligence, graduates will tend to marry graduates and produce children with similar intelligence, while others will tend to produce children without it.
"Unchecked, these trends," Herrnstein and Murray wrote, "will lead the U.S. toward something resembling a caste society, with the underclass mired ever more firmly at the bottom and the cognitive elite ever more firmly anchored at the top."... Are we there yet?... [M]aybe so.
Yet should we be so gloomy?... Not everyone has an emotional need to be on top: How many people, if they thought seriously about it, would really want the burdens of a CEO, however lavish the pay?... As Murray has written, all you need to do to avoid poverty in this country is to graduate from high school, get and stay married, and take any job. The intelligence needed to get a place in the cognitive elite may become more concentrated in a fair meritocratic society, but the personal behaviors needed to find a valued place in society are available to everyone. Meritocracy may mean less mobility, but that is bearable if, as Brooks says, "America is becoming more virtuous."...
The inheritance of inequality is strikingly large in America today: if the father's lifetime was 100% above the American average for his day, the son's lifetime income will on average be 65% above the American average for his day. That's a lot of inherited inequality. Is this unequal distribution of wealth, income, and status in the United States today the result of the fact that a genetic elite has risen to the top in a "fair" IQ-driven meritocracy?
No.
This high degree of inherited inequality isn't because high IQ genetic eliteness genes are being passed down from fathers to sons. As Samuel Bowles and Herbert Gintis (2002), "The Inheritance of Inequality," report:
The direct effect of IQ on earnings... presented in Bowles, Gintis, and Osborne (2002a)... is 0.15, indicating that a [one] standard deviation change in the cognitive score, holding constant... remaining variables... changes... earnings by about one-seventh of a standard deviation.... An estimate of the causal impact of childhood IQ on years of schooling... is 0.53 (Winship and Korenman 1999). A rough estimate of the direct and indirect effect of IQ on earnings... is then... 0.15+(0.53)(0.22) = 0.266....
h is the heritability of IQ.... The value cannot be higher than 1, and most recent estimates are substantially lower, possibly more like a half or less.... [C]ouples tend to be more similar in IQ than would occur by random mate choice.... [The] genetic correlation of parent and offspring [is] (1 + m)/2....
Using the values estimated above, we see that the contribution of genetic inheritance of IQ to the intergenerational transmission of income is (h2(1+m)/2)(0.266)2 = .035(1 + m)h2. If the heritability of IQ were 0.5 and the degree of assortation, m, were 0.2 (both reasonable, if only ball park estimates) and the genetic inheritance of IQ were the only mechanism accounting for intergenerational income transmission, then the intergenerational correlation [of lifetime income] would be 0.01, or roughly two percent the observed intergenerational correlation [of lifetime income between parents and children].
Two percent is simply not a large number. Factors that currently account for two percent of lifetime earnings inequality are simply not yet a big deal, and cannot be responsible for the fall in social mobility.
If there is ever to be a genetic elite, its members will surely exhibit two behavioral traits: a facility with math, and a near-intinctive tendency to do back-of-the-envelope quantitative checks of assertions. We can conclude only one thing from Barone's column: neither he nor his descendents (unless they get really lucky in their mates) are plausible candidates for membership in any "genetic elite".
It is worth pointing out that neither Richard Herrnstein nor Charles Murray are plausible candidates for membership in any "genetic elite" either. Let me turn the microphone over to impeccably right-wing Jim Heckman, who comments on The Bell Curve:
The Book fails for five main reasons. 1. The central premise of this book is the empirically incorrect claim that a single factor - g or IQ - that explains linear correlations among test scores is primarily responsible for differences in individual performance in society at large.... There is much evidence that more than one factor -- as conventionally measured -- is required to explain conventional correlation matrices among test scores.... They do not emphasize how little of the variation in social outcomes is explained by AFQT or g. There is considerable room for factors other than their measure of ability to explain wages and other social outcomes. 2. In their empirical work, the authors assume that AFQT is a measure of immutable native intelligence. In fact, AFQT is an achievement test that can be manipulated by educational interventions. 3. The authors[']... implicit assumption of an immutable g that is all-powerful in determining social outcomes leads them to disregard a lot of evidence that a variety of relevant labor market and social skills can be improved. 4. The authors present no new evidence on the heritability of IQ or other socially productive characteristics.... [T]hey... [compare] IQ... [to] a crude measure of parental environmental influences. This comparison is misleading. It fails to recognize the crudity of their environmental measures and the environmental component that is built into their measure of IQ, which biases the evidence in favor of their position. Moreover, the comparison as they present it is intrinsically meaningless. 5. Finally, the authors' forecast of social trends is pure speculation... the social policy recommendations have an ad hoc flavor to them.... The appeal to Murray's version of communitarianism as a solution to the emerging problem of inequality among persons is a deus ex machina flight of fancy that is not credibly justified.
Matthew Yglesias: Horatio Alger's IQ: One thing that always occurs to me when these race/IQ blowups occur is that this issue is kind of in the neighborhood of a different point that doesn't merely recapitulate the race science of yore, does seem to me to have real policy implications, and is really well-supported by the data. This is the fact that IQ test results are meaningfully predictive of various indicators of success in the United States and the main factors that influence how people score on these tests all happen in childhood or earlier (in the fetal environment, in the genes, etc.).
This then becomes one of several available lines of argument that the image of the United States as a magical place where hard work always pays off and the rewards go to those willing to put in the effort is wrong. What's more, the imagine of the United States as a fallen version of that magical place — a country that could become magical if we just improved urban high schools or adopted a better student loan system — is also wrong. Better high schools and better student loan systems are things worth doing on their own terms, but absolutely nothing one can do changes the fact that where people end up is substantially out of their hands...
This seems to me to be substantially wrong. The inheritance of inequality is strikingly large in America today: if the father's lifetime was 100% above the American average for his day, the son's lifetime income will on average be 65% above the American average for his day. That's a lot of inherited inequality. Is this unequal distribution of wealth, income, and status in the United States today the result of the fact that a genetic elite has risen to the top in an IQ-driven meritocracy?
No.
This high degree of inherited inequality isn't because high IQ genetic eliteness genes are being passed down from fathers to sons. As Samuel Bowles and Herbert Gintis (2002), "The Inheritance of Inequality," report:
The direct effect of IQ on earnings... presented in Bowles, Gintis, and Osborne (2002a)... is 0.15, indicating that a [one] standard deviation change in the cognitive score, holding constant... remaining variables... changes... earnings by about one-seventh of a standard deviation.... An estimate of the causal impact of childhood IQ on years of schooling... is 0.53 (Winship and Korenman 1999). A rough estimate of the direct and indirect effect of IQ on earnings... is then... 0.15+(0.53)(0.22) = 0.266....
h is the heritability of IQ.... The value cannot be higher than 1, and most recent estimates are substantially lower, possibly more like a half or less.... [C]ouples tend to be more similar in IQ than would occur by random mate choice.... [The] genetic correlation of parent and offspring [is] (1 + m)/2....
Using the values estimated above, we see that the contribution of genetic inheritance of IQ to the intergenerational transmission of income is (h2(1+m)/2)(0.266)2 = .035(1 + m)h2. If the heritability of IQ were 0.5 and the degree of assortation, m, were 0.2 (both reasonable, if only ball park estimates) and the genetic inheritance of IQ were the only mechanism accounting for intergenerational income transmission, then the intergenerational correlation [of lifetime income] would be 0.01, or roughly two percent the observed intergenerational correlation [of lifetime income between parents and children]...
If inherited genetically-based IQ were the source of the extra edge that the children of the rich get in our society, than we would expect a parent with 4 times average lifetime full-time earnings--say $200,000 a year--to have a kid with a lifetime average income of $51,500 instead of the average of $50,000. But it is not $51,500. It is $150,000.
I agree with Matt that "where people end up [in our society] is substantially out of their hands" (although not by any means completely): luck and inheritance of many kinds of things are incredibly important. But this does not mean that equality of opportunity is a mirage. For most of the things that are out of the hands of the individual are not out of our collective hands at all. Genetic influence on IQ is one of the big things that are out of our collective hands--and it turns out it is really not that big a thing at all.
Dani Rodrik suspects that they are smaller than Josh Bivens thinks they are:
Dani Rodrik's weblog: The pains from trade: The workhorse model of international trade (the 2x2 Heckscher-Ohlin model) has very stark implications for the effect of trade with poor, labor-abundant countries. Low-skilled workers in rich countries (read the U.S.) must end up as losers--not in relative terms, but in absolute terms. Moreover, the larger the overall gains from trade, the bigger must this adverse distributional effect be. In that world, it is inconsistent to claim there are large gains from globalization while downplaying the distributional impacts. Which is why many economists teach the model in their classrooms, but shift to other, more complicated models when they engage in the public debate about the effect of trade on wages.
A recent paper by Josh Bivens carries out a quantitative simulation of the basic 2x2 model which suggests that the increase in U.S. trade with the developing countries between 1995 and 2006 would have reduced labor earnings by 4 percent while increasing the payment for skills by 3 percent, for a 7% increase in the differential altogether. This is an interesting exercise, to be compared to that undertaken by my colleague Robert Lawrence. The latter gives much less of a role to trade, in large part because it finds there is little reduction in real earnings once adjustments for productivity, prices and benefits are made.
One clear difference between the two perspectives is the extent to which one thinks of trade with developing countries as competing directly with U.S. production. Lawrence says that developing country exports hardly displace any domestic production anymore because much of that activity has already shut down. So whatever adverse impact may have existed in the 1980s, the current situation is much more benign. (But of course, less impact on productive re-allocation means fewer overall gains from trade too!). In Bivens' world (and that of the standard 2x2 model), by contrast, head-to-head competition is critical in driving the distributional effects.
I am on Dani's side, only more so. Two additional points are important, I think:
For competition to be head-to-head, the two countries have to be making very similar goods with similar production processes. Hand-spinners in Pakistan don't compete with labor here in the United States but with the capital embodied in our large automated spinning mills.
What trade does to our distribution of income can be undone by normal domestic redistributionist policies. The right way to deal with the issue is to (a) maximize the third world's ability to take advantage of our demand to spur its own growth, and (b) use domestic redistribution here to compensate for any adverse distributional impact.
She praises Chris Dodd while trashing Chris Matthews, John McCain, Richard Nixon, and Hilary Clinton:
None Dare Call It Child Care: Chris Matthews of MSNBC asked whether this country would ever get back to the days when a young guy could come out of high school, get an industrial job “and provide for a family with a middle-class income and his spouse wouldn’t have to work.” Given the fact that more than two-thirds of American mothers have been working outside the home since the 1980s, Matthews could just as easily have demanded to know when we’ll get back to using manual typewriters and rotary phones....
In a two-hour debate that focused on job-related issues, the Republican presidential candidates managed to mention the Smoot-Hawley tariff and trade relations with Peru but not a word about child care for America’s working parents. John McCain... focus[ed] on the fact that “50,000 Americans now make their living off eBay,” that the tax code is “eminently unfair” and that Congress wastes too much money studying of the DNA of Montana bears....
[C]hild car... was one of the very first issues to be swift-boated by social conservatives... vetoed by Richard Nixon... members were flooded with mail accusing them of being anti-family communists....
[I]t is absolutely nuts that it isn’t a topic of discussion — or even election-year pandering.... The only candidate who talks about child care all the time is Chris Dodd....
This is Hillary Clinton’s Women’s Week. On Tuesday... a grab-bag of Clintonian mini-ideas... expand family leave. Yesterday, she was... speaking out for a bill on child care workers that has little chance of passage and would make almost no difference.... Clinton... wasn’t prepared to get any closer to the problems of working parents than a plan to help them stay home from work...
Substantively, a good column. Rhetorically, it rubs me the wrong way. Senator Smoot had a silly-sounding name: that doesn't mean that international trade regulation is a silly issue. Peru is a mountainous country far away filled with poor, darkish-skinned people who don't speak English. That doesn't mean Peru is of small importance. Hillary Rodham Clinton would be a good president (albeit not as good as Dodd) for childcare issues--she belongs classified with the good guys like Chris Dodd rather than to be rhetorically lumped with the malefactors like Matthews, McCain, and Nixon.
A 700-word column doesn't make an argument. Instead, it makes three kinds of assertions:
It asserts the main point of the column--that we Americans should think more and do more about childcare issues.
It asserts that the world works in the way assumed by the background against which the main point is painted--that talking about Peru is stupid because Peru is of small importance, and that talking about international trade is silly because Smoot sounds silly.
It asserts that some people are good guys (Dodd) and other people are bad guys (pundits, Republicans, Hillary Rodham Clinton).
Point 1 is good, point 2 is bad, point 3 is mixed. Am I wrong to demand that people do better?
It tends not to support claims like this one from Greg Mankiw that the rise in income inequality stopped at the end of the 1990s:
July 14, 2006: In today's NY Times, Paul Krugman calls attention to the update of the Piketty-Saez data on income inequality, although Paul describes the data differently than I would. Here is what I see: After rising substantially from 1986 to 2000, income inequality is essentially the same in 2004 (the most recent year of data) as it was in 2000...
Or this one from Alan Reynolds that income inequality did not rise at all:
The Top 1% . . . of What? - WSJ.com: The incessantly repeated claim that income inequality has widened dramatically over the past 20 years is founded entirely on these seriously flawed and greatly misunderstood estimates of the top 1%'s alleged share of something-or-other.... Some economists seem ready and willing to supply whatever is demanded. And there is an endless political demand for those able to fabricate problems for which higher taxes are, of course, the preferred solution. In Washington higher taxes are always the solution; only the problems change...
Bad news for non-immigrant relatively uneducated men. (America still offers an amazing deal to immigrants.) David Wessel writes about the latest labor market research. The Journal really should put Wessel on page A1:
Why Job Market Is Sagging in the Middle: The salaries of Wall Street's financial engineers are surging while wages in industrial companies stagnate. Manufacturers complain about "skill shortages" while cutting payrolls. The number of health-care jobs soars 45% over 15 years, outstripping the 25% increase in other jobs. Computers seem to have infiltrated every job, yet demand for unskilled, low-wage immigrants doesn't abate....
For decades, employers in the U.S. and other industrialized countries sought more skilled workers as technology and the availability of low-wage workers abroad diminished the employers' appetite for lesser-skilled workers at home. It was painful, but simple: Employers of all sorts wanted more skills and more education, and paid more to get them....
There is still strong demand for high-end workers -- the stars of finance, software, law, sports and entertainment -- as well as for the highest-skilled factory workers. The only news is the intensity of that demand, which is pushing up pay for those at the top.
-- and here's the switch -- demand is increasing for some workers at the low end of the pay scale: the ones who wipe brows in hospitals, care for kids, clear tables at bistros and stand guard in office-building lobbies. In 1980, about 13% of workers without any college education were working in such personal-service jobs, according to David Autor.... In 2005, 20% of them were.
The losers? "The sagging middle," says Princeton University economist Alan Krueger.... Lawrence Katz and Claudia Goldin... "U.S. employment has been polarizing into high-wage and low-wage jobs at the expense of traditional middle-class jobs."... Technology and globalization are boosting demand for the most-educated.... Top hedge-fund managers aren't being replaced by computers; they're harnessing them.... [T]echnology and globalization are eroding demand for workers who do routine tasks in factories and offices, many of whom are high-school or even college grads. The voice-mail system does away with switchboard operators; back-office software eliminates bookkeepers; robots replace assembly-line workers.... But technology and globalization are not eroding demand for personal-service workers... [which] have to be delivered here in the U.S. -- and in person -- either by natives or by immigrants....
Autor and colleague David Dorn examined places that were particularly heavy with easy-to-automate or easy-to-outsource jobs in 1980. By 2005, they discovered, wage inequality in those communities had widened more than elsewhere.... [W]hat, if anything, should the U.S. do about this? That's a harder question.... [S]horing up the middle by... meddling with the market would cost consumers heavily. Some, certainly not all, suggest letting the market be, and using the tax code to transfer money.... Others suggest "professionalizing" personal-service jobs, perhaps encouraging unionization, to boost wages. Unlike factory jobs, advocates reason, these jobs can't be moved offshore or automated if employers have to pay more.
The more popular solution -- at least among economists -- is a familiar one: Educate all workers so they are better at interpersonal or abstract skills... as opposed to dial-turning or keyboard-pounding...
This does call for more redistribution through the tax system: that is why the Star-Maker made progressive income tax systems on the Fourth Day, after all. I don't understand how any professional economist can disagree with the fact that more technology-driven inequality should call forth more social insurance in response.
Bubba Isnt Who You Think: Since I’ve just published an op-ed about the enduring influence of race on Southern voting, I’m sure to be accused of being a typical Northeastern snob talking about poor white trash who don’t know what’s good for them. So I thought I’d mention an important point... low-income whites in the South are not very different from low-income whites in the rest of the country.... It’s relatively high-income Southern whites who are very, very Republican. Can I get away with saying that rich white trash are the problem? Probably not.
What this reflects, in turn, is the odd fact that income levels seem to matter much more for voting in the South. Contrary to what you may have read, the old-fashioned notion that rich people vote Republican, while poorer people vote Democratic, is as true as ever--in fact, more true than it was a generation ago. But in rich states like New Jersey or Connecticut, the relationship is weak.... In the poorer South, however, the relationship is very strong indeed.
This is why it’s true both that rich voters tend to be Republican, and that rich states tend to be Democratic...
Politics in Black and White: Many press accounts of the march have a tone of amazement. Scenes like those in Jena, the stories seemed to imply, belonged in the 1960s, not the 21st century. The headline on the New York Times report, “Protest in Louisiana Case Echoes the Civil Rights Era,” was fairly typical.
But the reality is that things haven’t changed nearly as much as people think. Racial tension, especially in the South, has never gone away, and has never stopped being important. And race remains one of the defining factors in modern American politics.
Consider voting in last year’s Congressional elections. Republicans, as President Bush conceded, received a “thumping,” with almost every major demographic group turning against them. The one big exception was Southern whites, 62 percent of whom voted Republican in House races. And yes, Southern white exceptionalism is about race, much more than it is about moral values, religion, support for the military or other explanations sometimes offered....
Since the days of Gerald Ford, just about every Republican presidential campaign has included some symbolic gesture of approval for good old-fashioned racism. Thus Ronald Reagan, who began his political career by campaigning against California’s Fair Housing Act, started his 1980 campaign with a speech supporting states’ rights delivered just outside Philadelphia, Miss., where three civil rights workers were murdered. In 2000, Mr. Bush made a pilgrimage to Bob Jones University, famed at the time for its ban on interracial dating. And all four leading Republican candidates for the 2008 nomination have turned down an invitation to a debate on minority issues scheduled to air on PBS this week.
Yet... it would be wrong to suggest that the nation has made no progress... we are truly becoming a more tolerant, open society.... [T]he cynicism of the “Southern strategy” introduced by Richard Nixon, which delivered decades of political victories to Republicans, is now starting to look like a trap for the G.O.P.
One of the truly remarkable things about the contest for the Republican nomination is the way the contenders have snubbed not just blacks... but Hispanics. In July, all the major contenders refused invitations to address the National Council of La Raza, which Mr. Bush addressed in 2000. Univision, the Spanish-language TV network, had to cancel a debate scheduled for Sept. 16 because only John McCain was willing to come. If this sounds like a good way to ensure defeat in future elections, that’s because it is....
But to get the Republican nomination, a candidate must appeal to the base — and the base consists, in large part, of Southern whites who carry over to immigrants the same racial attitudes that brought them into the Republican fold to begin with. As a result, you have the spectacle of Rudy Giuliani and Mitt Romney, pragmatists on immigration issues when they actually had to govern in diverse states, trying to reinvent themselves as defenders of Fortress America...
How Immigration Affects U.S. Cities, by David Card, June 2007 [via]: Abstract:... This paper describes the effects of immigration on overall population growth and the skill composition of cities.... The labor market impacts of immigrant arrivals can be offset by outflows of natives and earlier generations of immigrants. Empirically, however, these offsetting flows are small, so most cities with higher rates of immigration have experienced overall population growth and a rising share of the less-skilled. These supply shifts are associated with a modest widening of the wage gap between more- and less-skilled natives, coupled with a positive effect on average native wages.... [I]mmigrant arrivals also affect rents.... The effect on rents is the same magnitude as the effect on average wages, implying that the average “rent burden” (the ratio of rents to incomes) is roughly constant. The local fiscal effects of increased immigration also appear to be relatively small. The neighborhood and school externalities posed by the presence of low-income and minority families may be larger, and may be a key factor in understanding native reactions to immigration.
Introduction: The U.S. is once again becoming a country of immigrants. Immigrant arrivals – currently running about 1.25 million people per year – account for 40% of population growth nationally, and a much larger share in some regions.... Something like 35-40% of new arrivals are undocumented immigrants from Mexico and Central America with low education and limited English skills.... Although another quarter of immigrants – from countries like India and China – are highly skilled, critics of current immigration policy often emphasize the presumed negative effects of lower-skilled people in the overall economy.... Moreover, even the most highly skilled immigrants are predominately non-white, contributing to the growing presence of visible minorities in the U.S. population.
The size and composition of immigrant inflows is a special concern in the nation’s largest metropolitan areas.... [In] the 17 largest metropolitan areas... [the] average share of immigrants in these cities is nearly 27%.... "[S]second generation" Americans... [are] about 20% of the population in the 17 largest cities.... [I]mmigrants are particularly attracted to cities with historical enclaves of earlier immigrants. Exploiting this immigrant-specific “pull factor” I infer that immigrant arrivals increase the local population, with only limited outflows of other groups... cities with more immigration have a larger share of lower-skilled workers.... The wage gap between the lowest-skilled natives (who are in most direct competition with immigrants) and natives at the middle of the skill distribution is 3-5 percentage points wider in high immigrant cities like New York and Los Angeles than in low-immigrant cities....
An equally important issue is the effect of immigration on average wages of native workers... it appears that immigration exerts a modestly positive effect on the labor market outcomes of most natives. This parallels the conclusion reached in simulations of the national impacts of immigration by Ottaviano and Peri (2006), and in a recent empirical study for California by Peri (2007).... [R]ents are higher in cities with increased immigration... the mean ratio of rent-to-income (the “rent burden”) among natives is unaffected by immigrant inflows....
I consider the relationship between the fraction of immigrants in a city and various indicators of local fiscal conditions... cities with more or less immigrants have similar (or slightly higher) earnings per capita, and similar “demographic burdens”.... [I]mmigrant families pose a potential externality on other urban residents through their impacts on school and neighborhood “peer groups.” While the monetary value is hard to quantify, existing research suggests that people value neighborhoods and schools with better-educated, higher-income, and non-minority neighbors and schoolmates. Indeed, my reading is that these peer group externalities may be a first-order concern among many urban residents...
[...]
There is strong evidence that many U.S. natives prefer to live in neighborhoods and school districts with fewer minorities and more high-income/highly-educated residents. Newly arriving immigrants pose a “peer group” effect that may partially offset or even completely reverse any positive labor market impacts. One clear indicator of a reaction to this effect is the rise in measures of school segregation between white non-Hispanics and Hispanics in many large cities over the 1990s. My view is that such “peer effects” – whether driven by genuine concern about spillovers from neighbors or schoolmates, or by perceived threats to social or group identity – may well be the most important cost of increased immigration in many natives’ minds...
Some of what may be going on is that America is--or has been--relatively welcoming to immigrants. Immigration is all by itself an enormous upward mobility event. And that is not factored into the standard transition matrix analyses.