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1. Chart of the Day (above) shows annual jobless rates for men and women between 1990 and 2015. In only 4 of the last 26 years (1997, 1998, 1999, 2000) has the male jobless rate been lower than the female jobless rate; in all other years the female jobless rate was either equal to the male jobless rate (1995, 1996, 2005, 2006) or below (1990-1994, 2001-2004, and 2007-2015). On average over the last quarter century, the average female jobless rate (5.88%) was below the average male jobless rate (6.28%) by 0.40%. Perhaps this gender difference in jobless rates explains some of the 17% un-adjusted gender wage gap — more men work in higher-paying jobs like construction that also have a higher risk of layoff or job loss (and higher average jobless rates) while women gravitate towards lower-paying jobs like teaching (81% of elementary and middle school teachers are female) that have greater job security and a lower risk of layoff or job loss (and lower average jobless rate).
2. Gender and Ethnic Wage Gaps. The BLS released its annual Women in the Labor Force: A Databook today for 2015, and buried in the 105 page report were these interesting wage gaps:
a. In 2000, Asian women earned 85 cents for every dollar men earned. In 2014, Asian women earned 97 cents for every dollar the average man earned.
b. In 2000, white women earned 92 cents for every dollar earned by Asian women. In 2014, white women earned 87 cents for every dollar earned by Asian women.
c. In 2000, the average white male earned 94 cents for every dollar an Asian man earned. In 2014, the average white male earned only 83 cents for every $1 earned by Asian men.
Bottom Line: Asian women are gaining on American men and now earn only 3% less on average than the average male worker. White women are falling behind relative to female Asian workers, as are white men falling behind relative to the earnings of Asian men. If gender pay disparities prove discrimination and motivate legislation, then maybe we need laws to equalize pay between whites and Asians?
3. Venn Diagram of the Day I (above). As a result of cigarette taxes in New York State that now exceed $6 per pack, the number of state-taxed cigarette packs sold in New York has plummeted by 54% in the past decade. Wouldn’t the $6.00 per hour “labor tax” being proposed in New York by raising the state’s minimum wage to $15 an hour from $9 have a similar negative effect on the state’s entry level employment opportunities?
4. Venn Diagram of the Day II (above). Since 1987, New York City has had a “minimum space law” that makes it illegal to build apartments smaller than 400 square feet. To make it easier for entry-level renters to find affordable apartments, the AP is reporting that “NYC officials are now proposing to end the limit on how small apartments can be, opening the door for more “micro-apartments” that advocates see as affordable adaptations to a growing population of single people.” And yet many of those same “officials” probably don’t realize that increasing the minimum wage, just like increasing a “minimum space law,” would make it harder for entry-level workers to find jobs.
5. The New York Times Editorial Board expressed its economic death wish for the state and the nation in its editorial last Sunday that called for a $15 an hour national minimum wage. The New York Times certainly has regressed a long way since 1987 when its editorial board exhibited a lot more economic sanity when it correctly advocated for “The Right Minimum Wage: $0.00.”
6. Good Question from Don Boudreaux: What if the same quality of reasoning and familiarity with economic reality and economic theory that fuel the typical argument in support of the minimum wage were to be applied to CEO pay? You can find Don’s answer here.
8. Who-d a-Thunk It? Waiting times under Canada’s socialized medicine have doubled? From Syracuse.com, “Canadians get most of their medical care for ‘free’ through their government’s health care system. But the waits are getting longer because of a doctor shortage and overcrowded clinics and emergency rooms. The median wait time to see a specialist in Canada is 18.3 weeks, up from 9.3 weeks in 1993.”
9. Markets in Everything: “The underbelly of e-commerce is a booming business in which little-known companies collect, process and often resell piles of unwanted gifts, flawed merchandise and other items that shoppers simply regretted buying. This holiday season, goods with an original retail value of $19.4 billion—nearly one-quarter of e-commerce sales—are expected to be returned, writes the WSJ. Hey, this provides more support for the position that the most economically efficient gift is…. cash.
10. Video of the Day. Another Milton Friedman classic video from around 1980, when the Nobel economist schools a young David Brooks and some other college-age students about why higher education NOT be subsidized by coercive taxation.
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Test your knowledge of recent economic news and data, most of which has been featured in recent posts on the Carpe Diem blog, with this new 10-question quiz below (links to the correct answers are provided, and there is no time limit).
NYC study finds some evidence of gender price differences, but it certainly isn’t systematic or widespread
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The New York City Department of Consumer Affairs (DCA) recently published a first-ever study on gender pricing in NYC titled “From Cradle to Cane: The Cost of Being a Female Consumer.” The DCA analyzed “nearly 800 products with clear male and female versions from more than 90 brands sold at two dozen New York City retailers, both online and in stores,” and found that “on average, women’s [and girl’s] products cost 7% more than similar products for men [and boys].”
Specifically: the gender price differences were on average 7% more for girl’s toys and accessories, 4% more for girl’s clothing, 8% more for women’s clothing, 13% more for female personal care products, and 8% more for female senior/home health care products. The main conclusion of the DCA study is that “women are paying thousands of dollars more over the course of their lives to purchase similar products as men.”
The first specific item highlighted in the report (see Figure 1, page 7, and the top graphic above) is the Radio Flyer “My First Scooter” pictured above from Target. According to the DCA, the girl’s scooter was priced at $49.99, twice the price of the boy’s scooter at $24.99. Target explained the price difference as a “system error” and the prices for both models (boy’s and girl’s) are now both $24.99 (see bottom graphic above). But that initial “finding” of NYC retailers engaging in widespread gender “price gouging” – by as much as 100% in the scooter example – sets the tone of the report and supports their conclusion that women are regularly taken advantage of by retailers in the form of higher prices, which then costs them thousands of extra dollars over their lifetimes from “cradle to cane.”
A few comments:
1. As Christina Sommers asked on Twitter: “What if parents are willing to spend more on daughters than sons? Is that bias against girls–or boys?” Good question….
2. Using some of the same or similar items analyzed by the DCA, I’ve done my own non-exhaustive price comparisons below at both Target. com and Walmart.com for six different items. For those items, and for many others I looked at, I really couldn’t find any evidence of gender price differences.
3. If there are examples of gender price differences, I would conclude that those are isolated cases, and are certainly not as widespread and systematic as the DCA study suggests. And in many cases it might not be a fair, “apples to apples” analysis for the DCA to compare prices by gender for general clothing categories like dress shirts, dress pants, shirts, socks, underwear, etc. Perhaps there are differences in styling and detail that make women’s clothing more expensive because it’s more expensive to manufacture?
4. Women may pay “thousands of extra dollars over their lifetimes to purchase similar products as men” as the DCA claims, but what about the fact that “men pay about $15,000 more for auto insurance over their lifetimes than women do“? In some cases, an 18-year male pays 51% more for auto insurance than what his twin sister would pay according to Coverhound.com, an insurance shopping service. Maybe that’s something the DCA should look into? (HT/”Not Sure” in the comments section below.)
5. If the items in question are truly similar (and sometimes only different by color), why are consumers choosing to buy the overpriced women’s [and girl’s] products instead of the lower priced men [and boys] products? (HT/”Not Sure”)
6. In the comments section, Scott Gustafson points out that the CPI for Men’s and Boy’s Apparel has increased over time at a faster rate than the CPI for Women’s and Girl’s Apparel. The graph above shows that difference – since 1950 the retail prices for men’s and boy’s clothing have increased by 174% compared to a price increase of only 98% for women’s and girl’s clothing. If there are gender differences in relative clothing prices, those differences have been around for at least 65 years.
7. To the extent that there are gender price differences for some items, perhaps the solution is not greater government oversight and regulation from the DCA and Mayor de Blasio, but increased competition, e.g. allowing Walmart to operate in NYC. It’s no secret that NYC Mayor de Blasio “doesn’t want Walmart in NYC.” According to the mayor, “I have been adamant that I don’t think Walmart — the company, the stores — belong in New York City, and I continue to feel that way.”
Here are my seven examples demonstrating that if gender price differences do exist, they certainly aren’t systematic and certainly aren’t widespread, based on some of my own research today online and at the St. Paul Target store! Prices for six of the items are exactly the same for boy’s and girl’s items, and in the last case the price for the girl’s helmet is less than the price for the boy’s helmet.
Update: Schick Razor Cartridges (see graphic below). According to the DCA, there was a $3.50 difference in the two items below ($18.49 for the women’s Schick cartridges vs. $14.99 for the men’s Schick cartridges). On Drugstore.com, there is only an 80 cent price difference ($17.79 vs. $16.99) and a comparison of the ingredients for the hydrating gels reveals that there is a difference in the two products, which could explain the 80 cent price difference. In any case, the two products are similar but not the same, so it might not be a fair “apples to apples” comparison. Further the handles that accompany these two razor blades are completely different, as explained here by Schick — “Why Use a Women’s Razor?”, which could explain any price differences in the razor handles.
Some women borrow razors from their husbands or boyfriends rather than choose one specially designed for women. However, using a women’s razor has its advantages. Typically, women shave more of their skin than men. Many women shave their legs, armpits and bikini area while most men only shave their cheeks and chin. Women’s razors are styled to accommodate the curves and contours that women shave. They have specially designed handles that allow for maximum grip as women navigate around tricky body parts, such as their knees.
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Here are three videos of the classic R&B Christmas standard “Merry Christmas Baby,” with performances by three of my favorite singers/pianists: Charles Brown in 1984, Ray Charles in 1979 and more recently by Dr. John (and Christina Aguilera) on the Letterman show in 2000:
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The two charts above show some interesting patterns in several data series over time and provide some possible demographic explanations for the stagnation and decline in real median US household income since around the year 2000. Here are some observations and comments:
1. The top chart above shows that the decline in real median household income in the US from the peak of $57,843 in 1999 to $53,627 last year (in 2014 dollars, data here in Table H-12) was accompanied by a gradual increase in the share of US households with no earners, which increased from less than 20% in 1999 to 24% in 2014. A regression analysis over the 1999-2014 period shows that every one percent increase in the share of US households with no earners is associated with a decrease in median annual household income of slightly more than $1,200. (Note: The R-squared of that regression was 89.3% and the t-statistic for the independent variable was -10.83.) Over that same period, the share of US households with two or more earners declined from slightly more than 45% in 1999 to 39.2% in 2014, which is another demographic factor that could explain the decline in median household income over the last decade.
2. What would explain the fact that the share of US households with no earners has steadily risen over the last 15 years to an all-time high of 24% last year? The bottom chart above provides one explanation: the rising share of the US adult population represented by: a) retired workers and b) disabled workers. According to Social Security Administration data, the number of retired workers plus the number of disabled workers remained stable at about an 18% share of the US adult population (18 years and over) between 1993 and about 2000 before gradually rising to an all-time high of 21.3% by 2014.
For example, in the ten-year period between 2004 and 2014, the number of retired workers increased by 27% (from 33 million to nearly 42 million) and the number of disabled workers increased by 37.5% (from 7.95 million to nearly 11 million). Because the adult population increased by less than 11% during that decade, the share of the US adult population represented by retired and disabled workers increased from 18.3% to 21.3% between 2004 and 2014 and was by far the largest increase over any previous 10-year period in the SSI data back to 1970. As can be seen in the bottom chart above, the rise in the share of retired and disabled workers over the last decade accompanied the decline in US median household income over that period. A regression analysis shows that every 1% increase in the share of the US adult population represented by retired and disabled workers is associated with a $1,200 decline in median household income.
Bottom Line: Perhaps the stagnation and decline in US household income that gets so much media and political attention isn’t necessarily the result of the usual negative factors that get cited so frequently: stagnating wages, reduced economic and employment opportunities for the average, middle-class American, the increased share of rising income or wealth going to the top X%, the hollowing out of the middle class, the claims that the middle class is shrinking/losing ground/disappearing/declining, etc. Rather, perhaps there’s a less-nefarious, demographic-driven reason that household incomes have been stagnating/declining in recent years — the increase in the share of US households with no earners, which is largely driven by the aging US population and the increasing number of retired workers, and to a lesser extent by the increasing number and share of disabled workers. Finally, there’s been nearly a six percentage point decline in the share of US households with two or more earners since 1999, which could be another demographic change that has contributed to a decline in median household income.
With some of the significant changes outlined above in important demographic factors that have taken place over the last decade or so: an increase in the share of US households with no earners, a decrease in the share of US households with two or more earners, an increase in the number and share of US adults who are retired or disabled, and a gradual decline in the average household size (from 2.67 to 2.54 over the last 20 years), along with the devastating effects of the Great Recession on the US economy and household incomes, it maybe would actually be a surprise if there hadn’t been a decline in median household income in recent years.
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Scott Shackford wrote on the Reason blog recently that “The Middle Class Is Shrinking! Because They’re Getting Rich!” and referred to the bottom chart above that was featured in the Pew Research Center’s recent report titled “The American Middle Class is Losing Ground.” However, as the title of Scott Shackford’s blog post suggests, the share of middle class households is getting smaller for a good reason — it’s because they’ve moved up to higher income groups. Specifically, according to Shackford:
It is true that Pew’s analysis shows that the number of households that fit within their categorization of middle class has shrunk by 11 percentage points since 1971 [from 61% to 50%]. It is true that the proportion of households that are classified as lower class has increased from 25% to 29%. But it is also true that the proportion of households that are classified as upper class has increased from 14% to 21%.
That is to say, part of the reason that the middle class is disappearing is that they are succeeding and jumping to the next bracket. And a greater number of them are moving up than moving down. Be wary of the assumption that the drop in the middle class is a sign of a crisis.
Referring to the Pew Research Center report, Warren Meyer pointed out recently on The Coyote Blog (“Are We Really Going to Sell Socialism in This Country Based on the Fact that the Middle Class is Getting Rich?“) that “2/3 of the [middle-class] losses were because they moved to ‘rich.'” That is, of the 11 percentage point loss in the share of middle-class households between 1971 and 2015, 7 percentage points represent the middle-class households who moved up to one of the two highest-income groups, which represents 7/11, or 64% of the shrinkage of middle-class households.
I’ve written before about how, Yes, the middle class has been disappearing… but disappearing into higher income groups as Scott Shackford reports, see my most recent CD post here. Here’s an update of some of the analysis in that post using more recent Census Bureau data on household income.
The top chart above paints a picture of an America with rising incomes for many American households and lots of upward income mobility since 1967, using recently updated Census Bureau data through 2014 available here. In 1967, nearly six of every ten (58.2%) US households earned $50,000 per year or less (in 2014 dollars), about one in three (33.7%) earned $50,000 to $100,000 and fewer than one in twelve households (8.1%) earned $100,000 or more. By last year, fewer than half of US households (46.8%) earned less than $50,000 per year, 28.5% earned $50,000 to $100,000, and most remarkably about one in four (24.7%) American households now earn $100,000 or more. For those three income categories, the biggest change was the 16.6 percentage point increase in the highest income category of $100,000 or more over the last 47 years (from an 8.1% to 24.7% share), which reflected an 11.4 percentage point decrease in the share of US households in the lower-income category ($50,000 income or less) from a 58.2% share to 46.8%, and a 5.2 percentage point decrease in share of households earning $50,000 to $100,000 per year (from 33.7% to 28.5%).
Stated differently, the share of American households earning $100,000 or more per year (in 2014 dollars) increased more than three-fold from 8.1% in 1967 to 24.7% in 2014. If the 8.1% share of households in 1967 earning $100,000 or more hadn’t increased over time to 24.7%, there would only be about 10 million US households today (out of 123.2 million) earning $100,000 or more, instead of the actual number of more than 30 million American households in that high income category. Thanks to America’s economic dynamism, upward mobility and rising incomes, there are now 20+ million more American households earning annual incomes of +$100,000 annually today (30.4 million) than there would be if the 8.1% share of high-income households that prevailed in 1967 hadn’t changed (only 10 million households).
And think about it for a moment and let it sink in — there are now more than 30 million US households with annual incomes of $100,000 or more. And the share of American households with that level of high income has increased by more than three times since 1967! And then compare that picture of a prosperous America to the narratives we hear all the time that the American middle class is: losing ground, falling behind financially, disappearing, stagnating, no longer a majority, fill in the blank ___________.
Bottom Line: I think Warren Meyer’s 10-word summary about the shrinking middle-class says it best and most concisely of all: 2/3 of the losses are because they moved to “rich.”
Holiday shopping? Consider the most economically efficient gift of all: cash, to avoid the deadweight loss of giving
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Although that strategy didn’t work out so well for Jerry Seinfeld….
It’s that time of year for my annual post on the “deadweight loss of Christmas gift giving.”
1. Economist Steven Landsburg writing in his book the “Armchair Economist: Economics and Everyday Experience“:
I am not sure why people give each other store-bought gifts instead of cash, which is never the wrong size or color. Some say that we give gifts because it shows that we took the time to shop. But we could accomplish the same thing by giving the cash value of our shopping time, showing that we took the time to earn the money.
2. In a 1993 American Economic Review article “The Deadweight Loss of Christmas,” Yale economist Joel Waldfogel concluded that holiday gift-giving destroys a significant portion of the retail value of the gifts given. Reason? The best outcome that gift-givers can achieve is to duplicate the choices that the gift-recipient would have made on his or her own with the cash-equivalent of the gift. In reality, it’s highly certain that many gifts given will not perfectly match the recipient’s own preferences. In those cases, the recipient will be worse off with the sub-optimal gift selected by the gift-giver than if the recipient was given cash and allowed to choose his or her own gift. Because many Christmas gifts are mismatched with the preferences of the recipients, Waldfogel concludes that holiday gift-giving generates a significant economic “deadweight loss” of between one-tenth and one-third of the retail value of the gifts purchased.
3. The National Retail Federation estimates that Americans will spend $630.5 billion this year during the 2015 holiday season. If the deadweight loss estimates of Professor Waldfogel are accurate (one-tenth to one-third of total spending), that would mean that between $63.5 billion and $210 billion of the spending on gifts this holiday season will be wasted.
4. In the Seinfeld episode above, Jerry thinks like an economist and tries to avoid the deadweight loss by giving his close friend Elaine a beautifully gift-wrapped package that contains $182 in cash for her birthday. Watch as Jerry’s economic thinking about giving cash backfires, suggesting that there might be a cost to giving cash as a gift that Professor Waldfogel’s model didn’t consider.
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Here are four new items on the
minimum wage law government mandated price floor that guarantee reduced employment opportunities for low skilled and limited-experience workers, especially minorities.
1. Last year Larry Reed wrote an article titled “How the Minimum Wage Folks Think [Badly], And What Economists Think of That,” here’s an excerpt:
If you’re a lay person and are wondering how a good economist sees the way the minimum wage advocate thinks, the following will explain the matter. The good economists can’t help but conclude that minimum wage believers are guilty of one or more of the following errors:
1. They believe in political law (edicts, orders, and mandates) but not economic law (supply and demand and the market-clearing function of prices and wages);
2. They think that every job and every person is automatically worth at least as much as Congress decrees to be the minimum;
3. They believe that even if a person or a job is really worth less than the minimum, employers will still hire them and happily eat the loss;
4. They often have no clue that they’re unwitting accomplices of organized labor, which favors a minimum wage hike as a way to disadvantage its lower-cost or less-skilled or non-union competition;
5. They usually oppose raising the minimum to $100/hour but can’t figure out why the reasoning that leads them to that conclusion applies to any other increase too;
6. They never tell you that European OECD countries that don’t have a minimum wage have an average unemployment rate about half the average jobless rate of European OECD countries that do (see table above for OECD data in 2014, updated from Larry’s original article).
Updates: a) Germany has been added to the chart above in response to some comments that questioned its exclusion. As of January 1, 2015 Germany now has a federal minimum wage, which is why I didn’t include it before. However, since the jobless rate data are for 2014 when Germany did not have a minimum wage, I have now included it in the table.
b) Note that many European countries without a federal minimum do have union contracts for some workers that establish minimum wages for certain workers in certain industries. But not ALL workers are covered by those contracts. For example, in Italy about 80% of workers’ wages are established by union agreements, while 20% of workers are not covered by union contract, and would therefore not be protected by a federal minimum wage. The workers least likely to be covered by a union contract would be younger workers, which might explain why the average youth jobless rate in European OECD countries without a federal minimum wage (15.8%) is so much lower than countries with a federal minimum wage (29.5%).
c) Larry Reed’s original article cited an analysis by economist Steve Hanke who concluded that:
In the 21 EU countries where there are minimum wage laws, 27.7% of the youth demographic was unemployed in 2012. This is considerably higher than the youth unemployment rate in the seven EU countries without minimum wage laws – 19.5% in 2012.
d) See related Forbes article “The Appalling Unemployment Damage Of The Minimum Wage,” by Tim Worstall who says that I have actually understated the minimum wage effect in the European OECD countries by using market exchange rates to express the minimum wages in US dollars. According to Tim, it’s actually worse if we use “purchasing power parity” exchange rates. Tim’s conclusion:
The minimum wage dumps from a great height on the poor, young, untrained and disfavored for other reasons in our society. By insisting that some goodly portion of them remain unemployed and thus untrained, poor and disfavored as they lose their youth.
e) See related article by Cato Institute’s Dan Mitchell “Minimum Wage Mandates Help Workers … Into the Unemployment Line.”
2. In Wednesday’s WSJ (might require subscription), UC-Irvine economist David Neumark summarizes the overwhelming empirical evidence confirming the expected negative employment effects of government-mandated minimum wages in his op-ed “The Evidence Is Piling Up That Higher Minimum Wages Kill Jobs.” Here’s a slice:
President Obama says “there is no solid evidence that a higher minimum wage costs jobs.” On the contrary, a full and fair reading of the evidence shows the opposite. Raising the minimum wage will cost jobs, particularly those held by the least-skilled.
3. In the WSJ yesterday, Michael Saltsman outlines some of the drawbacks of mandated minimum wages for the restaurant industry in his op-ed “A Dubious New Menu Item: No Tipping.” Here’s the summary: Minimum wages go up by government fiat to $15 for example, which significantly raise a restaurant’s labor costs. To stay in business, restaurants decide to eliminate tipping, pay servers a fixed hourly wage, and raise menu prices by 25% or more to cover the higher labor costs with fixed hourly wages as high as $15. Without the monetary incentives from tipping, servers are less motivated and provide lower-quality service. Facing menu prices that are 25% higher or more, possibly with lower-quality service, and with no control over their server’s tip, customers are less motivated to eat at those no-tip, higher cost restaurants with servers who are less motivated than before.
As Michael Saltsman concludes, “As more full-service restaurants are forced to consider the tip-free approach, the customers confronted with higher prices and employees who face smaller paydays should remember who’s to blame.” They can thank the minimum wage proponents who: a) are guilty of one or more of the errors outlined above in Item #1 and/or b) ignore the overwhelming evidence outlined in Item #2 above.
4. In a Forbes article a few weeks ago Tim Worstall made the important, but frequently overlooked, point that “if you tax something, you get less of it.” Applying that important economic concept to the minimum wage, which is equivalent to a tax on unskilled labor, leads us to conclude that higher minimum wages have to result in fewer employment opportunities for unskilled workers. That is, raising the minimum wage from $7.25 an hour to $15 an hour is equivalent to imposing a $7.75 an hour tax on employers who hire unskilled workers. If you correctly believe that a $7.75 an hour tax on unskilled workers would reduce the number of hours of unskilled labor demanded by employers, then you would have to agree that a $15 an hour minimum wage would have to have negative employment effects.
Another example of the “tax something, you get less of it” principle that Tim highlights in his article is – the window tax, which was a property tax in England from about 1700 to 1850 that was based on the number of windows in a building. When they taxed windows, they predictably got fewer windows in England, as the pictures below clearly show (see more photo examples here). Think of the covered windows as unskilled workers who had jobs before the minimum wage (before the window tax), but were “shut out” of the labor market following the government mandated wage increase (tax) on employers hiring unskilled workers.