Most recent annual rates, compiled by Trading Economics. The US is right in the middle:
Argentina 109%
Turkey 43.7%
United Kingdom 8.7%
Italy 8.2%
Germany 7.2%
Australia 7%
Euro Area 7%
South Africa 6.8%
Mexico 6.3%
France 5.9%
Singapore 5.7%
Netherlands 5.2%
United States 4.9%
India 4.7%
Canada 4.4%
Indonesia 4.3%
Brazil 4.2%
Spain 4.1%
South Korea 3.7%
Japan 3.5%
Saudi Arabia 2.7%
Switzerland 2.6%
Russia 2.3%
China 0.1%
In his NY Times column today, Ross Douthat argues that legalizing marijuana is a big mistake. Douthat makes a number of arguments, but let me focus on one point he makes in the column: that recent research suggests legalizing marijuana increases opioid deaths. This point is made in just one sentence of the essay, so let me quote it in full:
There was hope, and some early evidence, that legal pot might substitute for opioid use, but some of the more recent data cuts the other way: A new paper published in the Journal of Health Economics finds that “legal medical marijuana, particularly when available through retail dispensaries, is associated with higher opioid mortality.”
Kudos to Mr. Douthat for actually linking to the paper. That’s what the internet is for! Yet so many writers in traditional news sources fail to do this.
Now, on to the paper itself. There is nothing untrue in what Douthat writes. First, there was plenty of “early evidence” that legalizing marijuana reduced opioid deaths. More on this in a moment. And the study he cites by Mathur and Ruhm is particularly well done. It is published in the top health economics journal. But the main point of the paper is to say “we think the rest of the literature is wrong, and we’re going to try really hard to convince you that we are right.”
What does the rest of this literature say? Here’s a brief tour (all of these are cited in Mathur and Ruhm). The variable in question is opioid deaths.
Continue reading70,000: that’s the number of adults (age 25 and older) in the US that earned the federal minimum wage of $7.25 per hour in 2021.
Another 538,000 adults reported earning below the minimum wage, but these are likely to be workers that earn tips, which aren’t reported in their hourly wages. Legally, they must make at least $7.25 including their tips, though many of them earn more. The data comes from a 2022 report by BLS using CPS data (hopefully the 2023 report is coming out soon).
If we include all workers 16 and older, there are about 1.1 million people earning the federal minimum wage or less. That’s just 1.4% of hourly wage earners, and only 0.8% of all workers (including salaried workers). Crucially, this number has declined dramatically over time from a high of 15.1% of hourly wage earners (8.9% of all workers) in 1981. It has even declined significantly since 2010, the first full year that the $7.25 federal minimum was in effect, when 6% of hourly wage earners (3.5% of all workers) earned $7.25 or lower.
Perhaps, though, a big part of this decline is because most states (and even some cities and counties) now have minimum wages that are above the federal level, in some cases significantly above. Today, only 20 states use the federal minimum wage. No doubt this is important!
However, even if we focus just on those 20 states that use $7.25 per hour as the minimum, there were also large declines in the percent of hourly wage earners that earned $7.25 or less. Some states declined by 7 percentage points or more from 2010 to 2021, though all declined by at least 3 percentage points.
But maybe what’s going on is that employers are just providing wage increases that keep up with price inflation. So while fewer workers are earning the federal minimum wage, maybe they are no better off. We can address that possibility using BLS’s occupational wage data, which allows us to look at wages at the 10th percentile (these aren’t exactly minimum wage earners, but they are close). Real wage declines did happen in a few states (Alabama, Louisiana, and Mississippi), but most of these states experienced clear real wage growth from 2010 to 2021 at the 10th percentile of earners.
Here are the changes in percentage terms (once again, adjusted for CPI inflation).
Some might look at this growing irrelevance of the minimum wage as a reason to increase the federal minimum wage. But as the data from most states suggests, there are clear increases in wages happening already, suggesting that these are competitive labor markets. The case for raising the legal minimum wage in a competitive labor market is weak (it is stronger in a monopsony labor market).
Kevin Erdmann has written a detailed and thoughtful response to my post from last week on housing spending as a percent of income. My goal in that post was to look at consumer spending as a percent of income for a variety of different sub-groups (my primary interest was by age group, but I tried to get into more detail for other sub-groups).
As Erdmann emphasizes in his post, I left out one set of sub-groups that the CEX data allows us to use: renters vs. homeowners. And these are very important groups to look at, since for homeowners (as he points out) many of the costs are implicit (such as the opportunity cost of those that don’t have a mortgage). Lumping all of these households together may obscure some of the different trends.
Be sure to read Erdmann’s post in full (he says many smart and correct things), but the key result is in his Figure 2 (reproduced here). Renters have seen the share of their income spent on shelter rise from 19% in 1984 to 24% in 2021. This is not a trivial increase. Owners, by contrast, have seen their share of spending fall, which is how it all gets washed out in the average.
I will concede that Erdmann is probably right on many of his many points. Still, I wanted to see this at a much finer level of detail, since national aggregates might be giving us confusing results. The micro-data in the CEX is probably not detailed enough to give us good breakdowns by MSA.
Continue readingUPDATE: see also this post on homeowners versus renters, which givens important context to this post.
Are Americans spending more of their income on housing than in the past? Using data from the Consumer Expenditure Survey back to 1984, the answer is pretty clear: no. In fact, it has declined mildly.
This concern is usually raised on the context of young people. Are young people spending more of their income on housing than in the past? No.
For working-age Americans, the percent of their income spent on housing has declined mildly since 1984, but I think it’s accurate to say it’s pretty stable (I have truncated the y-axis so you can see the detail). It’s true that young people spend more of their income on housing than older people, but this has always been true, and the gap is pretty constant.
Continue readingIn August 2022, I wrote a post showing that among G7 nations, the US had the highest inflation during the pandemic, but also the highest rate of real economic growth. But since the economic situation is evolving rapidly, I wanted to update that data from mid-2022 (I also use core inflation, but I’ll use total inflation in this post).
Here’s how inflation has looked during the pandemic:
While the US had the most cumulative inflation for much of the pandemic, the cooling of inflation in the US and the acceleration in Europe has changed things a bit. By late 2022, the UK and Italy had caught up to the US, and Germany is closing in too. These countries have cumulative inflation of between 15 and 17 percent since January 2020.
Japan looks to be the winner here. But wait, we don’t only care about low and stable inflation. We also want economic growth. Here’s the data through the 4th quarter of 2022 (we’ll start to get 2023q1 data from countries next week):
By this measure, the US comes out as the clear winner, with real GDP being about 5 percent higher than the end of 2019. That might not sound impressive for 3 years of growth, until you realize that 5 of the 7 nations had growth below 2 percent, with Germany and the UK actually still smaller than the end of 2019! And this doesn’t take account of the cumulative losses. Notice that the US had the second smallest dip in 2020q2 as well.
It’s hard to know exactly what the right non-COVID counterfactual would be, since these countries all had different rates of growth before the pandemic. But adding up the GDP scaled to 100 before the pandemic, the US is the only G7 country where these 12 quarters of data add up to more than 1,200. The other countries haven’t even had enough growth since the 2020 recession to make up for the losses during the recession, to say nothing of what their potential growth would have been. Japan comes the closest to making up the losses, while the UK stands out as the worst.
Here’s the figures for all the G7 countries, with 100% meaning they have had enough growth to offset the losses from the 2020 recession:
US: 100.8%
Japan: 99.3%
Canada: 98.6%
Germany: 98.0%
France: 97.1%
Italy: 96.9%
UK: 94.5%
Back in December I pointed out that, thanks to slowing inflation, real wages had been rising since June 2022 (using either the CPI or the PCEPI for inflation adjustments).
With the latest monthly data, we can now report more good news for wage earners: CPI-adjusted wages have increased over the past 12 months. That had happened since 2021. In the past 12 months, wages of production and non-supervisory workers are up 5.1%, just a hair more than the annual increase in the CPI of 5.0%. It’s not much, and we’re not back to our pre-pandemic norm of 2% real wage growth. But it is more good news that we may finally getting past our post-COVID inflationary hangover.
There’s nothing that economists love more than a good blackboard (or in modern times, a whiteboard) to work out some basic models of how we think the world works. Supply and demand rules in microeconomics, but macroeconomics has a few good blackboard models too.
So I was excited to see when a member of Congress was using a whiteboard to work through some basic economic logic, as Rep. Katie Porter did in this video she tweeted using the textbook macroeconomics aggregate demand and aggregate supply model:
However, while I haven’t taught macroeconomics in about a decade, it seems there are a few flaws in her analysis. Flaws enough that this probably wouldn’t get a passing grade on an oral exam. I could detail them myself, but… I will leave this to the readers as an exercise! For fun, even if you don’t think this is the best model in the world, just assume it’s a good model. What did Rep. Porter miss? Leave a comment.
You might have seen this chart recently. It comes from a letter published in the New England Journal of Medicine in April 2022. The data comes directly from the CDC. It shows the leading causes of death for children in the US. You will notice that firearm-related deaths have been rising for much of the past decade, and in 2020 eclipsed car accidents as the leading cause.
Many are sharing this chart in response to the recent elementary school shooting in Nashville. It’s natural to want to study these problems more in the wake of tragedies. After the Uvalde shooting last year, I tried to read as much as I could about the history of homicide and gun violence in the US, and to look at the research on what might work to reduce gun violence, which is summarized in a post I wrote last June.
That being said, I don’t think the chart above accurately characterizes the problem of elementary school shootings. It might accurately describe some broader problem, but it’s misleading with respect to the shooting we all just witnessed. The most important reason is that the definition of “children” here extends to 18- and 19-year-olds. Much of the gun-related homicides for “children” shown here are gang-related violence, not random school shootings at elementary schools. It’s not that we shouldn’t care about these deaths too — we very much should care — but the causes and solutions are entirely different from elementary school mass shootings.
Continue readingRecently I was watching a lecture by historian Marcus Witcher which addressed the treatment of African Americans in the Jim Crow era. Witcher mentioned the “pig laws,” which were severe legal punishments given to Blacks in the South for what used to be petty crimes. Such as stealing a pig. He mentioned that the fines could be anywhere from $100 to $500, and then he asked me directly: how much is $100 adjusted for inflation today?
My initial, immediate answer was about $3,000. That turns out to be almost exactly correct for around 1880. But the more I thought about it, the more I realized that this wasn’t a satisfactory answer. We were trying to put $100 from a distant past year in context to understand how much of a burden this was for African Americans at the time. Does knowing that adjusted for inflation it’s about $3,000 give us much context?
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