Wednesday, February 24, 2016

More on politicized science

Thanks to Stefan Molyneux for hosting a great interview. In the video below, we talk about the wage impact of immigration, diversity in higher education, and public-sector union dues. The common thread is the politicized science that plagues the discourse on these topics. Give it a watch!





P.S. – Some commenters caught me in an embarrassing slip of the tongue. I off-handedly referred to people picking “mushrooms” in the hot sun. Of course, most commercial mushrooms are grown indoors.

Friday, January 15, 2016

Public-sector compensation and compulsory union dues

Earlier this week I wrote a blog post for NR on the correlation between compulsory union dues and excessive pay in the public sector. The centerpiece of the post was a chart showing the compensation premium in each state. Unfortunately, the editors removed some of the state labels in order to squeeze the chart on to the blog. Below I've reposted the entire piece, with the full version of the chart available by clicking on it.
Public Employees May Soon Be Less Overpaid

As James Sherk, Mark Pulliam, and others have already noted here, the Supreme Court appears poised to strike down all compulsory union dues for government workers. I have no legal analysis of my own to offer, but as a policy matter it is important to point out the correlation between compulsory dues and the degree to which public employees are “overpaid.”

A couple of years ago, Andrew Biggs and I compared state workers’ total compensation – meaning wages plus benefits – with the compensation of similarly-skilled private workers. We found that most states pay their workers a premium over private-sector levels. The chart below orders the states from the largest premiums to the smallest. Union dues are compulsory for public workers in the states colored blue, while dues are not compulsory in the states colored red. (Categorizing each state by its treatment of public union dues can be tricky, but the website Watchdog.org appears to have done the most thorough job.)

Click for a readable version.
 
Compulsory dues are clearly associated with larger premiums for public employment. State workers in compulsory states are paid 17.0 percent more on average than comparable private workers, while state workers in non-compulsory states are paid just 5.6 percent more. And note that Michigan and Wisconsin only recently switched to voluntary dues, so most of the impact has yet to be felt in two of the higher-paying voluntary states.
The usual caveat about correlation and causation applies, but the data are consistent with the view that union strength really does matter. When dues are compulsory, unions have more money to lobby public officials for generous pay packages. If the Supreme Court limits union funding to voluntary donations, public-employee compensation will probably still be excessive, but less so. It’s a start!

Saturday, January 9, 2016

Revisiting the Mariel boatlift

Last week I wrote a piece for Real Clear Policy detailing the new debate over the Mariel boatlift. From the intro:
Does immigration lower the wages of native workers? There is perhaps no event more often cited on this question than the "Mariel boatlift." After Fidel Castro announced in 1980 that anyone wishing to leave Cuba could do so via the port of Mariel, 125,000 Cuban immigrants came to Miami between April and September of that year. The sudden influx of workers generated an intriguing test of how immigration affects wages in one city.
Update: The Center for Immigration Studies has published an expanded version of my piece as a backgrounder.

I then appeared on Breitbart Radio ostensibly to talk about the article, but not surprisingly we talked more generally about immigration policy. (The boatlift is a dry topic, no pun intended.) Listen to the interview below, or visit the original Breitbart page here.

Sunday, January 3, 2016

Here is public pension fallacy #10

I spent a large part of my early career working on the public pension issue, especially as it relates to public-sector compensation. During that time, I encountered a number of fallacious talking points -- some transparently false, others having a surface plausibility -- which pension advocates frequently deploy.

Not actually where pension funds come from.
A few years ago I put together a paper that lists and responds to each of the fallacies. It's had some staying power. Even after my Heritage Foundation exit and subsequent inability to promote my pension work, the paper gets passed around and cited fairly often. It even appeared on the list of the top ten most-read Heritage papers for much of 2015. Here are the nine fallacies:
Fallacy 1: The average public pension payment reflects the generosity of the plan’s benefits.

Fallacy 2: The cost of a public pension plan is equal to whatever the government contributes to the pension fund each year.

Fallacy 3: Public pension plans can “assume away” risk because governments are long-lived.

Fallacy 4: Advocates of risk-adjusted discounting are merely a niche group of contrarian economists.

Fallacy 5: Critics of public pension accounting assumptions are projecting low rates of return.

Fallacy 6: The investment returns earned by a pension fund pay for most pension benefits, so taxpayers are actually charged very little.

Fallacy 7: Public pensions are not overly generous because they are simply deferred compensation.

Fallacy 8: Generous pensions are necessary because some government employees do not participate in Social Security.

Fallacy 9: Closing a public pension carries major transition costs.
Click the link above to read concise responses to each of these fallacies.

For reasons that were never clear to me, a tenth fallacy included in my manuscript did not survive the publication process. So here is the original text of what I'll now call public pension fallacy #10:
Fallacy 10: Pension payments serve as a tremendous economic stimulus.

The National Institute on Retirement Security (NIRS), a public pension advocacy group, publishes studies that purport to show the stimulus effects of pension benefits. Its latest report states that $2.37 in economic activity is generated for every dollar distributed via pension checks. The NIRS report has spawned numerous state- and local-based stimulus studies that make similar claims.

But all of these claims are empty of any policy relevance. The stimulus effects are based on the uncontroversial notion that economic activity (such as paying pension benefits) begets further economic activity. The fallacy is in ignoring what economic activity would be generated by taxpayer money if it were not diverted to pensions in the first place. As the NIRS study acknowledges, the stimulus effects it cites are the gross economic impacts of pension benefits, not taking into account the de-stimulative effects of moving employee and taxpayer money out of the economy and into the pension plans. 

If public pensions did not exist, the money otherwise used to fund them might be spent in ways that are at least as stimulative as NIRS claims pensions to be. For that reason, the stimulus studies published by NIRS tell us nothing about whether pensions are good economic policy.
For an expanded discussion, see my piece with Andrew Biggs, "Public Pension Stimulus Nonsense."

Despite regular debunkings, NIRS has continued to issue an annual report dedicated to the stimulus fallacy. Each new report uses the same methodology, with no acknowledgement of the criticism the previous one invariably gets. It's not so much research as it is propaganda.

Friday, December 18, 2015

Don't trust the politicized science

It should come as no surprise that science is influenced by politics. Scientists are people, too, with the same kind of political beliefs and biases that everyone exhibits to one degree or another. It’s natural for people with a strong ideological predisposition to want the science to match their beliefs. Therefore, we should regard with healthy skepticism any "important new study" that just happens to support whatever is politically fashionable.

Somewhere along the line, however, elite commentators seem to have lost their own skepticism. For them, "The Science" is a tool to denounce opponents as not merely wrong, but intellectually ignorant to boot. They portray their own views as developing from The Science, but often it's the other way around.

I wrote on this topic for National Review last week, and I've posted the whole piece below:
Why Americans Are Skeptical of “The Science”

Many elite commentators complain about Americans’ reluctance to accept the Science (with a capital “S”) underpinning certain political issues. They blame cognitive dissonance, ignorance, and even delusion. But maybe it is something else -- the wisdom of experience.
I was reminded of that last week when writing about the affirmative action case currently before the Supreme Court. The case rests on whether states’ interest in diversity at public universities can justify racial discrimination. Briefs from several authoritative-sounding academic organizations such as the American Educational Research Association argued that diversity clearly improves higher education. So the Science has spoken!

And yet, as I noted, an actual perusal of the data on college diversity reveals the evidence is suggestive at best, not conclusive. Why, then, were the academic briefs so misleading? Consider for a moment what an official statement from an academic organization should look like. It should be a dispassionate, apolitical review of the relevant research. The statement should lay out what we know with reasonable confidence, what we do not yet know, and how we might expand our knowledge going forward. It should ideally take no position on legislation, court cases, or any other issue that goes beyond the data.

Needless to say, that’s not what the briefs are. They are political advocacy with a veneer of science -- full of value-laden language, tendentious literature reviews, excoriations of contrary research, and an unbridled confidence not befitting scientists.

The briefs are reminiscent of the same-sex marriage case from last spring, when the American Public Health Association offered up evidence that gays and lesbians suffer mental health problems when they cannot legally marry, then declared this evidence to be “another compelling reason” to support same-sex marriage. It turns out the evidence was not convincing in the least. And even if it were convincing, it would not necessarily follow that marriage laws should be changed. (If legalizing same-sex marriage makes Christians depressed, would that be a compelling argument against legalization?)

Not everyone reads legal briefs, obviously, but many people seem to have realized one way or another that academic organizations are not disinterested parties. Since those organizations cannot be trusted to offer apolitical expertise, then who can? It’s a serious problem, and until it’s solved, Americans are wise to be skeptical of claims that Science backs this or that fashionable cause.

A good example for me would be climate change. I know nothing about it. I would love to be able to read reports from, say, the Intergovernmental Panel on Climate Change and come away feeling like I have a good grasp of the scientific issues. And yet how could I be so confident, knowing what I know about politics infecting other expert reports? I would need to have amnesia. If elites in government and academia want Americans to be less skeptical about the Science, it would help for them to stop inserting politics under its banner.
After the NR post ran, a friend pointed me to a piece by Jose Duarte, a self-described non-conservative researcher who nonetheless understands why people on the Right would be distrustful of academics tackling political questions. He notes that conservative skepticism of politicized science is not a matter of ignorance at all, but rather experience. "The most highly educated conservatives are the most distrustful of academia," which exactly fits with my point above. The section in Duarte's piece titled, "Examples of the bias and its consequences" is especially recommended.

Friday, October 9, 2015

The literature advances. Political debates don’t.

Do teachers earn less than the minimum wage?
When “teaching hours” are quantified, one may argue that teachers’ salaries are adequate for the hours they work. But I can attest that if anyone ever quantified the hours that I, and many of my colleagues, submit to create and maintain cutting-edge instruction, we would be making less than minimum wage and we’d be better off flipping burgers.

Read more here: http://www.miamiherald.com/news/local/community/miami-dade/community-voices/article37779582.html#storylink=cpy
That quote comes from a teacher making the federal minimum wage of $7.25 an hour would need to work about 21 hours per day, 365 days a year, to reach the average annual teacher salary of $56,000.

Road map for navigating political debates.

But what's bothersome isn't the exaggeration. It's this part: "...if anyone ever quantified the hours..." If? People have been quantifying teacher working hours for years. (See our working paper on the topic, and note the literature review in particular.) Instead of repeating the talking point that teachers work some extremely large but unknowable amount of time outside of the classroom, why not look into the research? We actually have data that measure teacher work time as definitively as anyone could hope for, and the paper linked above has all of the details. (TL;DR: Teachers work about 41 hours per week during the school year.)

I've noticed a depressing pattern in Washington. Even as the literature advances, politicians and reporters still have the same old debates featuring the same old talking points. Sometime soon, there will be another person who says that teachers have it easy because the school day is less than eight hours. Then someone like Ms. Futterman will respond that teachers work a lot at home. And then the debate will stagnate, without anyone bothering to investigate whether those work hours at home could be quantified. Lather, rinse, repeat.

It's true of so many issues. (Don't get me started about a certain topic in psychology.) Each side has their talking points, and the reporters seem uninterested in moving beyond them. Another example is the Cato Institute's new report on federal pay, which mentions that Feds make 78 percent more than private-sector workers before any adjustment for skill differences. Predictably, critics responded that the greater average education and experience of federal workers could explain the difference. And then... stalemate.

I've seen this movie before. Five years ago, the same events transpired, and no one in the media seemed interested in testing whether education and experience actually do account for the difference. Andrew Biggs and I decided to do that analysis, and it inspired several other reports that compare similarly-skilled workers in each sector, including one from the CBO and a summary of each report from the GAO. The new literature established that federal workers do receive, on average, greater compensation than their private-sector counterparts.

So the debate in Washington moved on to how to reform pay, right? No. The new Cato point about a 78 percent premium without skill controls, and the mechanical reaction to it about the need for such controls, indicate that we've come full circle. Federal pay is back to being he-said-she-said. I noticed a few years ago how the careful studies summarized by the GAO were dismissed by the media:
The takeaway from the [GAO] report has often been depicted by news sources as something like: “All these studies give different answers, so we just don’t know how federal pay stacks up.” Or: “All of the studies have limitations of some kind, so we shouldn’t trust any of them.”

Is that really the best interpretation? Let’s compare the results of the five studies that attempted apples-to-apples comparisons by matching workers or jobs between sectors. These are the aforementioned AEI, Heritage, and CBO studies, a report by the Project on Government Oversight (POGO), and the federal government’s official annual wage comparison conducted by the President’s “Pay Agent.”


In summary, four of the five studies find that total federal compensation is higher than private-sector compensation. The fifth study (the Pay Agent report) cannot come to any conclusion because it does not consider benefits. So all of the studies reviewed by GAO that actually reached a conclusion found that federal workers are overcompensated...
When not a single study has yet even claimed to overturn the basic conclusion drawn by Heritage, AEI, POGO, and the CBO, one would think the media would sound less discouraged about ever getting a definitive answer to the federal pay question. One would think.
So why are so many issues stuck in this perpetual cycle of talking point, counterpoint, rest, repeat, even as the literature advances beyond those disputes? I can think of a few reasons, but this post has already used up my quota of cynicism for the day.

Monday, September 21, 2015

The costs of immigration are real

A recurring theme of my writing is that, first, immigration has both benefits and costs, and, second, that the costs are systematically downplayed by immigration boosters. For example, back in the spring I wrote about the fiscal cost of immigration in "The Amnesty Numbers Game":
Consider a congressional hearing held March 17 by the House Oversight and Government Reform Committee. The purpose was to determine the fiscal impact of President Obama’s executive actions on immigration, specifically the granting of work authorization via executive order to millions of illegal immigrants. Witnesses opposed to amnesty presented serious reasons why the president’s actions could impose a cost on taxpayers. At every stage of the hearing, however, Democrats responded with dismissive grandstanding and appeals to authority.
Earlier this summer I discussed the cultural cost of immigration in a piece for Real Clear Policy called "Are Low-Skill Immigrants Upwardly Mobile?":
The desire to increase social mobility has taken center stage in recent years, as lower-skill workers and their families struggle to join the middle class. A recent New York Times poll found that only 35 percent of Americans agree that "everyone has a fair chance to get ahead in the long run." The explanations for insufficient mobility are many and varied.... But whatever the root causes of class stratification, the political class tends to ignore a major policy that worsens the problem — namely, the mass immigration of low-skill workers.
Two of my most recent pieces focus on the distributional costs of immigration. Increasing the supply of labor lowers production costs, but the savings come in the form of lower wages for the workers competing with immigrants. The direct connection between the economic benefits (lower consumer prices) and distributional effects (lower wages) is sometimes denied by immigration boosters. But, as I wrote in a National Review piece, other times they are honest -- perhaps inadvertently honest:
The [farm lobby's] report is clear about the ... desire to keep wages low by increasing the supply of labor. It describes wage increases as “a strain on many U.S. farms” that other industries have managed to avoid. It shows that real wages for food preparers, housekeepers, cashiers, and other low-skill workers outside farming have decreased since 2002. The reason, according to the report, is that “employers in non-agricultural industries have been able to find enough workers to fill job vacancies without upward pressure on wages.” Farm owners wish they had the same privilege.
Finally, I wrote about an important new paper from George Borjas (my advisor in graduate school), who has re-examined the wage impact of the Mariel boatlift:
There is perhaps no economic study more often cited by immigration advocates than economist David Card’s 1990 analysis of the “Mariel boatlift.” After Fidel Castro announced in 1980 that anyone wishing to leave Cuba could do so via the port of Mariel, 125,000 Cuban immigrants came to Miami in a matter of months that summer. The sudden influx of young, able-bodied workers generated an unusually good test of how immigration affects wages. Economic theory predicts wages should have declined in Miami after the boatlift, but Card was surprisingly unable to detect any wage impact at all.
Borjas found that there was a decline in wages, concentrated among the least skilled natives.