Check your assumptions, Noah Smith

Brad DeLong has made the effort to digest and abbreviate Noah Smith’s latest post for us:

Lunchtime Must-Read: Noah Smith: Job Shortage or Stagnation Vacation?

Noah Smith:Job Shortage or Stagnation Vacation?: “Are Americans working less because the government is paying them not to work?…

…A large number of people seem to think this. Obviously the idea is popular on the right–recall Mitt Romney’s infamous ’47 percent’ speech in 2012. But a surprising number… have picked up the idea…. Casey Mulligan…. Kurt Mitman…. Jordan Weissmann…. Economists… like simple stories… like effects that they understand… the idea that taxes are an incentive not to work is a simple, uncontroversial idea….But… if government programs are paying people not to work, then that should put upward pressure on real wages…. But when we look at the data, that’s not what we see happening…. When you break up the wage data by percentile, it looks even worse for the vacation thesis…. Economics 101 says that when the price of something and the quantity produced both fall, demand, not supply, has fallen. In America, the price of labor and the quantity of labor have both fallen and stayed low since 2009. That is a hint that the government’s welfare programs are having only a minimal impact on the number of Americans with jobs. Whatever caused us to stagnate for five years and counting, it probably wasn’t welfare.

This reads like a laundry list of theories, assumptions, and rules of thumb.  What could go wrong?

I would argue that the quantity of labor since 2009 has not fallen and stayed low.  The relevant quantity being the quantity available, not the quantity used.


And, that’s all I have time for right now.



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