Jobs and wages in the United States: Finally some policy debate

A student shared a recent oped by Alan Blinder at the WSJ.

Andrew, Thanks for sharing! Something like this should be on the final, right? 😉  Actually, this is more about micro-level policies and supply side policies that we have not focused on.  I will note that [some] economists are generally pretty skeptical of this:

Mrs. Clinton also advocates widespread profit-sharing as a way to put more money into workers’ pockets. She would promote that goal both by using the presidential bully pulpit and by providing tax incentives for businesses that share profits. Since the scholarly evidence suggests that profit-sharing raises productivity, such tax breaks will partly pay for themselves.

If profit sharing were good for the bottom-line, then presumably many more companies would have adopted it. Like Silicon Valley firms do with stock options.  Anyway, an empirical issue, and the jury is very mixed about whether a big initiative would do much. But FDR encouraged us to experiment, and hopefully if she [Clinton] does do it it will be something that states can match (or opt out) so we get evidence for the effects, and learn something. Incidentally, the health care legislation also was partly designed to induce variation across states so we (the polity) could learn more about what programs are more/less effective.

Economists also pretty much agree that adult retraining has relatively low payoff (except for highly motivated adults… like you MBA students).   A good (somewhat old) discussion of the issues is by Lalonde.  As Blinder notes, early childhood interventions (like getting lead out of water) have enormous benefit-cost ratios by comparison. But young kids don’t vote.

I’ll also take issue with Blinder’s cavalier dismissal of protectionism… raising tariff (by being more aggressive in filing complaints of dumping and export subsidies through the WTO process) probably would have short term effects of raising employment and wages. The problem is that the mechanism it does this is often very inefficient- costs are raised for everyone else. Autoworkers would definitely benefit from a 30% tariff… but everyone who buys a new car has to pay, and much of the benefit goes to shareholders rather than workers.

Anyway, thanks Andrew… I should post this to my blog!

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
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