Wednesday, March 20, 2013

Is there sufficient evidence to conclude that women experience systematic pay discrimination?

In one of my micro sections we read a chapter about pay for men and women in the book The Economics of Public Issues.

Is there sufficient evidence to conclude that women experience systematic pay discrimination? Not according to Harvard economist Claudia Goldin. See The Truth About the Pay Gap: Feminist politics and bad economics by Steve Chapman. Here is an excerpt from that article:
"I [Chapman] asked Harvard economist Claudia Goldin if there is sufficient evidence to conclude that women experience systematic pay discrimination. "No," she replied. There are certainly instances of discrimination, she says, but most of the gap is the result of different choices. Other hard-to-measure factors, Goldin thinks, largely account for the remaining gap -- "probably not all, but most of it."

The divergent career paths of men and women may reflect a basic unfairness in what's expected of them. It could be that a lot of mothers, if they had their way, would rather pursue careers but have to stay home with the kids because their husbands insist. Or it may be that for one reason or another, many mothers prefer to take on the lion's share of child-rearing. In any case, the pay disparity caused by these choices can't be blamed on piggish employers.

June O'Neill, an economist at Baruch College and former director of the Congressional Budget Office, has uncovered something that debunks the discrimination thesis. Take out the effects of marriage and child-rearing, and the difference between the genders suddenly vanishes. "For men and women who never marry and never have children, there is no earnings gap," she said in an interview."
This issue came up recently in the San Antonio Express-News. See Texas wage gap 12th-lowest. The problem with saying women make 77 cents for every dollar that men make is that it does not take things like occupation and years of experience into account. In 2007 the American Association of University Women issued a report. One of the things it says is:
"Ten years after graduation, women fall further behind, earning only 69 percent of what men earn. Even after controlling for hours, occupation, parenthood, and other factors known to affect earnings, the research indicates that one-quarter of the pay gap remains unexplained and is likely due to sex discrimination."
I emailed them the following question but never heard back:
"So the 69 percent means that women earn 69 cents for every dollar that men make ten years after college. That makes the gap 31 cents. But when these other factors are accounted for, one-quarter of the gap remains. Since one-quarter of 31 is 7.75, that means when all other factors are held constant, women earn 92.25 cents for every dollar that men make. Is my interpretation correct? How does this compare to what other studies have found? Is this gap changing over time? Were any other causes for the remaining 7.75 cents examined besides sexual discrimination?"
The Federal Reserve Bank of St. Louis just issued a report that says Gender Wage Gap May Be Smaller Than Many Think. Excerpts:
"...the gap between the median earnings for men and women was 16.5% in the second quarter of 2011, a historical low and down from 30% in 1989. ... the gender wage gap is very likely affected by the disparity of men in higher paying professions. That disparity, while troublesome all on its own, may be skewing the data.

“Research suggests that the actual gender wage gap (when female workers are compared with male workers who have similar characteristics) is much lower than the raw wage gap,” the authors write.

... after having children many women prefer jobs that have lower pay but better benefits — either better health-care coverage or other perks like a more flexible work schedule.

Economists Eric Solberg and Teresa Laughlin applied an index of total compensation, which accounts for both wages and benefits, to analyze how these benefits would affect the gender gap. They found a gender gap in wages of approximately 13%. But when they considered total compensation, the gender gap dropped to 3.6%,” the authors write."

Monday, March 18, 2013

Is There Economic And Political Meaning In "The Wizard of Oz?"

To get a handle on this, you can read Money and Politics in the Land of Oz By Quentin P. Taylor. Also, for my students, there is an article in chapter 15 of the micro book by Tucker and in chapter 18 in the macro book.Below is an excerpt:

"Dorothy, the protagonist of the story, represents an individualized ideal of the American people. She is each of us at our best-kind but self-respecting, guileless but levelheaded, wholesome but plucky. She is akin to Everyman, or, in modern parlance, “the girl next door.” Dorothy lives in Kansas, where virtually everything-the treeless prairie, the sun-beaten grass, the paint-stripped house, even Aunt Em and Uncle Henry-is a dull, drab, lifeless gray. This grim depiction reflects the forlorn condition of Kansas in the late 1880s and early 1890s, when a combination of scorching droughts, severe winters, and an invasion of grasshoppers reduced the prairie to an uninhabitable wasteland. The result for farmers and all who depended on agriculture for their livelihood was devastating. Many ascribed their misfortune to the natural elements, called it quits, and moved on. Others blamed the hard times on bankers, the railroads, and various middlemen who seemed to profit at the farmers’ expense. Angry victims of the Kansas calamity also took aim at the politicians, who often appeared indifferent to their plight. Around these economic and political grievances, the Populist movement coalesced.

In the late 1880s and early 1890s, Populism spread rapidly throughout the Midwest and into the South, but Kansas was always the site of its most popular and radical elements. In 1890, Populist candidates began winning seats in state legislatures and Congress, and two years later Populists in Kansas gained control of the lower house of the state assembly, elected a Populist governor, and sent a Populist to the U.S. Senate. The twister that carries Dorothy to Oz symbolizes the Populist cyclone that swept across Kansas in the early 1890s. Baum was not the first to use the metaphor. Mary E. Lease, a fire-breathing Populist orator, was often referred to as the “Kansas Cyclone,” and the free-silver movement was often likened to a political whirlwind that had taken the nation by storm. Although Dorothy does not stand for Lease, Baum did give her (in the stage version) the last name “Gale”-a further pun on the cyclone metaphor.

The name of Dorothy’s canine companion, Toto, is also a pun, a play on teetotaler. Prohibitionists were among the Populists’ most faithful allies, and the Populist hope William Jennings Bryan was himself a “dry.” As Dorothy embarks on the Yellow Brick Road, Toto trots “soberly” behind her, just as the Prohibitionists soberly followed the Populists.

When Dorothy’s twister-tossed house comes to rest in Oz, it lands squarely on the wicked Witch of the East, killing her instantly. The startled girl emerges from the abode to find herself in a strange land of remarkable beauty, whose inhabitants, the diminutive Munchkins, rejoice at the death of the Witch. The Witch represents eastern financial-industrial interests and their gold-standard political allies, the main targets of Populist venom. Midwestern farmers often blamed their woes on the nefarious practices of Wall Street bankers and the captains of industry, whom they believed were engaged in a conspiracy to “enslave” the “little people,” just as the Witch of the East had enslaved the Munchkins. Populists viewed establishment politicians, including presidents, as helpless pawns or willing accomplices. Had not President Cleveland bowed to eastern bankers by repealing the Silver Purchase Act in 1893, thus further restricting much-needed credit? Had not McKinley (prompted by the wealthy industrialist Mark Hanna) made the gold standard the centerpiece of his campaign against Bryan and free silver?"

But not everyone agrees with this. Economist Bradley Hansen wrote an article titled The Fable of the Allegory: The Wizard of Oz in Economics in the Journal of Economic Education in 2002. Here is his conclusion:

"Rockoff noted that the empirical evidence that Baum wrote The Wonderful Wizard of Oz as an allegory was slim, but he compared an allegorical interpretation to a model and suggested that “economists should not have any difficulty accepting, at least provisionally, an elegant but controversial model” (Rockoff 1990, 757). He was right—we did not have any difficulty accepting it. Despite Rockoff’s warning, we appear to have accepted the story wholeheartedly rather than provisionally, simply because of its elegance. It is as difficult to prove that The Wonderful Wizard of Oz was not a monetary allegory as it is to prove that it was. In the end, we will never know for certain what Baum was thinking when he wrote the book. I suggest that the vast majority of the evidence weighs heavily against the allegorical interpretation. It should be remembered that no record exists that Baum ever acknowledged any political meanings in the story and that no one even suggested such an interpretation until the 1960s. There certainly does not seem to be sufficient evidence to overwhelm Baum’s explicit statement in the introduction of The Wonderful Wizard of Oz that his sole purpose was to entertain children and not to impress upon them some moral. The Wonderful Wizard of Oz is a great story. Telling students that the Populist movement was like The Wonderful Wizard of Oz does seem to catch their attention. It may be a useful pedagogical tool to illuminate the debate on bimetallism, but we should stop telling our students that it was written for that purpose."

Friday, March 08, 2013

What Do An Obama Economic Advisor And A Bush Economic Advisor Agree On?

They both agree that the Earned Income Tax Credit (EITC) program is a better anti-poverty program than the minimum wage.

Click here to read what the Bush advisor says (Greg Mankiw, who was the chair of the Council of Economic Advisors under GW Bush)

Click here to read what the Obama advisor says (CHRISTINA D. ROMER, who was the first chair of the Council of Economic Advisors under Obama)

Wednesday, March 06, 2013

Hungary Tries a Dash of Taxes to Promote Healthier Eating Habits

Click here to read the New York Times article by SUZANNE DALEY (from March 3, 2013). This week in my micro class, we read a chapter from the book The Economics of Public Issues on obesity in the U. S.. There are two major trends that have lead to weight gains in recent decades: More sedentary jobs (their relative pay has increased) and lower relative total cost of food (including preparation time).

As the article says, "Nearly two-thirds of Hungarians are overweight or obese, and the country has the highest per capita salt consumption in the European Union."

So what has the government done?
it "...has, in the past 18 months, imposed taxes on salt, sugar and the ingredients in energy drinks, hoping both to raise revenues and force those who are eating unhealthy foods to pay a little more toward the country’s underfinanced health system"
 Other excerpts:
"Hungary has one of the lowest life expectancy rates at birth in the European Union: in 2011 it was just 71.2 years for men and 78.7 for women. In 2009, the most recent statistics available for all 27 members of the bloc, life expectancy in the group averaged at 76.6 years for men and 82.6 years for women."

"But critics point out that the new interest in food taxes just happens to coincide with tough economic times in Europe. Some say the taxes are as much about raising revenues in a politically acceptable manner as they are about promoting healthy habits. And they worry that the taxes do, in fact, hit the poor the hardest. 

One effort to raise taxes on saturated fat has already failed spectacularly. In October 2011, Denmark became the first country to institute such a tax, raising the price of meat, dairy, edible oils and fats, margarine and other blended spreads, among other items. Fans of the effort thought Denmark was perfectly positioned to make such a tax work, because it already had rigorous labeling requirements, an efficient administration and companies used to making these kinds of adjustments. 

But barely a year later, Denmark gave up on the tax. In the end, experts say, the effort was undermined by political battles, pressure from the food industry and a population that quickly learned to go over the border to Germany to buy the products it wanted."

"The move to institute food taxes in Hungary began ambitiously. It was first nicknamed the “hamburger tax” and included the idea of a tax on fast food. But the effort was later renamed a “chips tax,” skirting the issue of fat altogether, a change that many people attribute to lobbying by multinational corporations. And in the end, the taxes were applied only to packaged foods, making it easier to carry out. The rates vary depending on the food group: adding, for instance, about 13 cents to the cost of a 100-gram, or nearly 4-ounce, chocolate bar, or about 20 cents to a small bag of potato chips. 

But many Hungarians just do not think the taxes are working and see the effort primarily as a revenue-raising instrument..."

"Sales of salty and sugary foods have dropped in the last year, officials said. But it is hard to tell if the taxes had much to do with it. Hungarians, struggling with high unemployment and a dismal economy, bought less of all kinds of foods last year"

many "...customers were not particularly aware of the special taxes on products like powdered soup mixes, jams and chocolate, because the government had raised sales taxes at roughly the same time, making many purchases more expensive."

"The government hoped to collect 20 billion forints, about $88 million, from the food taxes last year and fell 3 billion forints, or about $13 million, short. One reason was that energy drink makers quickly changed their products to duck the tax."

An industry rep said "...taking salt out of a product can have serious technical consequences. In many cases, it serves as a preservative.""

and "...much of the salt that Hungarians consume is not actually from prepackaged foods but from salt added to food cooked at home."

Monday, March 04, 2013

Should U. S. Citizenship Be For Sale?

See A Market Solution to Immigration Reform: The U.S. needs more people with skills and vision. To get them, it should sell the right to become a citizen by GARY S. BECKER AND EDWARD P. LAZEAR, from yesterday's Wall Street Journal. Excerpts:
"We propose that, instead of the current maze of rules and formulas, the U.S. should sell the right to become a citizen. Setting a price of perhaps $50,000 would attract those who place the highest value on citizenship."

"...the U.S. system currently gives much lower preference to workers with skills than do countries like Germany."

"...the sale of immigration slots could be coupled with a loan program that allows people to borrow the fee and to pay it back out of their earnings over an extended period."

"There are several benefits to a market-based immigration system. First, it would attract skilled, productive, entrepreneurial people..."

Second, current citizens could provide loans or pay the fee of immigrant relatives who matter the most to them. This would encourage the best kind of family reunification.

Third, because the current system for legal immigration favors relatives of those already here, immigrants tend to come from relatively few countries. Opening immigration up to the rest of the world is fairer and would be of greater benefit to the U.S.
Finally, selling the citizenship right would bring in much-needed revenue for the government. About one million immigrants arrive legally each year. That is $50 billion in the system we propose."

"People who are now here illegally could become legal by paying the fee."

"Of course, some illegal immigrants might choose to stay underground to avoid paying the fee. For that reason, the sale of slots must be coupled with strong enforcement of the laws."

"A point system requires that the government choose the number of points to award to skills, family ties, age, time living in the U.S., and other factors that are extraneous to economic growth. This means politics will influence the points awarded."

Yes, the price of a slot may also be subject to politics. If it is high, the U.S. will have fewer and more skilled immigrants. This probably means Republicans would favor a higher price and Democrats a lower price—each wanting immigrants they believe would vote for them. Still, selling slots won't create major misallocations among those who come in, once the price is determined."

"...allow people to pay an annual fee, renewable for up to three years, at the end of which time they would leave the U.S. or commit to pay the citizenship fee."

 Mr. Becker, a Nobel laureate, is a professor of economics at the University of Chicago. Mr. Lazear, former chairman of the president's Council of Economic Advisers (2006-09), is a professor at Stanford University's Graduate School of Business. Both are fellows at Stanford's Hoover Institution.