New research in economics suggests that raising the minimum wage will improve the health of many Americans, especially those with low income, and this improvement should help bend the cost curve for medical care.

In a paper published by the prestigious National Bureau of Economic Research, David Meltzer and Zhou Chen (from the University of Chicago and the Centers for Disease Control) analyze data from the Behavioral Risk Factor Surveillance System (BRFSS) from 1984-2006. The BRFSS interviews more than 350,000 adults each year, making it the largest health survey in the world. Meltzer and Chen test whether variation in the inflation-adjusted minimum wage is associated with changes in body mass indexes of adults. They find that gradual reductions over time in inflation-adjusted minimum wages across states explain about 10% of the increases in average body mass since 1970.

Additional evidence derives from a study by DaeHwan Kim and myself that used the Panel Study of Income Dynamics (PSID) to investigate whether increases and decreases in inflation-adjusted wages predict obesity. The PSID is a nationally representative sample of 5000 American families that have been followed since 1968 by the University of Michigan’s Survey Research Center. We find that low wages predict increases in the prevalence of obesity. This study was published in the Journal of Occupational and Environmental Medicine. Obesity is estimated to cost $190 billion in medical bills each year according to a recent study in the Journal of Health Economics. A 10% decrease in obesity would result in a $19 billion of savings every year, as estimated by Meltzer and Chen.Read more

What we read today:

• Discredited: How Employment Credit Checks Keep Qualified Workers Out of a Job (Demos)
• Colorado, other states show the way on immigration reform (Denver Post)
• 401(k): Pass or Fail? (Fox Business)
• Labour plans crackdown on employers exploiting migrants (The Guardian)

In the fourth quarter of last year, Nevada and California had the highest Asian American unemployment rates of the ten states with sufficient Asian American data for analysis. The Asian American unemployment rate in Nevada was 8.4 percent and 7.8 percent in California. The lowest Asian American unemployment rates were in New Jersey (4.2 percent) and Hawaii (4.5 percent). Rates for all ten states (and for other racial groups) can be found in this interactive feature.

Although we have data for only ten states, these ten states contain more than two-thirds of the Asian American labor force (see Figure D). Nearly half of all Asian American workers reside in California, New York, and Texas alone. Because Asian Americans are quite diverse socioeconomically, it would be useful to disaggregate the data by Asian ethnic group, but a number of data issues make disaggregation not feasible.

In four states—California, Florida, Maryland, and Texas—the Asian American unemployment rate is higher than one might expect. Generally, more educated populations have lower unemployment rates. In these four states, although data from the American Community Survey indicates that the Asian American labor force is better educated than the white labor force, the Asian American unemployment rate is equal to or higher than the white rate. Further research is necessary to understand why Asian Americans have such high unemployment rates in these states.

Following the President’s expression of support for a $9.00 minimum wage, Sen. Tom Harkin (D-Iowa) and Congressman George Miller (D-California) sent out a press release indicating their support for increasing the minimum wage to $10.10 (this proposal follows their 2012 effort to pass legislation supporting a $9.80 minimum wage).  Their proposal would increase the minimum wage via three incremental increases of $0.95, after which it would be indexed to inflation. The tipped minimum wage (the minimum wage paid to workers who earn a portion of their wages in tips) would also be increased in $0.85 increments from its current value of $2.13 per hour, where it has languished since 1996, until it reaches 70 percent of the regular minimum wage. At noon today, Senator Harkin and Congressman Miller will unveil the Fair Minimum Wage Act of 2013.

Raising the minimum wage would help reverse the ongoing erosion of wages that has contributed significantly to growing income inequality, while providing a modest stimulus to the entire economy, as increased wages contribute to GDP growth, which in turn leads to modest employment growth. Following are the major national findings of an upcoming EPI report on the impacts of a $10.10 minimum wage for the country and individual states.Read more

Teddy Wayne’s Sunday New York Times article about the exploitation of 20-somethings in the workplace (“The No-Limits Job”) should wake up a lot of young workers and their parents. There is something seriously wrong with a corporate culture that uses extremely low-paid or even unpaid labor and then treats the workers like they own them.

The low point in the article is probably the story of Dalkey Archive Press, of Champaign, Illinois, which not only employs unpaid interns but threatens them with “immediate dismissal” if they come in late or leave early without permission, are “unavailable at night or on the weekends,” or “fail to respond to e-mails in a timely way.” But as Wayne makes clear, round-the-clock, 24-7 internships can be exploitative even when paid.

One of my personal heroes, Ross Perlin, the author of Intern Nation, is interviewed by Wayne and warns about a sinister change in our culture that has made it acceptable to young people to give up their personal time and devote themselves to an employer, totally blurring the line between personal life and work while receiving almost no financial reward. This problem is worst in what Perlin calls the “rock-star professions”—film, TV, publishing, and media—and in creative industries like fashion, but the trend is spreading to other fields as well. Even un-hip businesses like manufacturers and law firms have begun to advertise for and employ unpaid labor, and failure to pay for overtime is endemic in white-collar work.

The Fair Labor Standards Act, which requires payment to employees of at least the minimum wage, is conveniently ignored by employers who rationalize their exploitation and illegality by arguing that the jobs are for the benefit of the interns, who usually do learn something and can put the experience on their resume. However, as Perlin explained in his book and Wayne’s article corroborates, a new phenomenon, the serial intern, is developing.Read more

What we read today:

• Automatic Reductions in Government Spending — aka Sequestration (Congressional Budget Office)
  
• Minimum Wage/Maximum Growth (The Innovation Files)
• How Much Does Race Still Matter? (New York Times)
• What’s So Bold about $9.00 an Hour? Benchmarking the Minimum Wage (Dissent)

Supporters of the Immigration Innovation Act, dubbed the “I-Squared Act,” claim that legislation to dramatically increase the annual quota for H-1B guest worker visas is urgently needed to keep and create jobs in America. But the I-Squared Act will do just the opposite.

The headline in the leading news daily in India – the Times of India – had this assessment: “Proposed H-1B legislation to help Indian IT [companies]…”

CLSA, a leading financial advisory firm that analyzes the offshore outsourcing industry for investment clients, believes I-Squared will spur the sector’s growth. The firm finds the proposed legislation is “encouraging for Indian IT companies,” most of which are outsourcing companies with a business model that sends high tech American jobs overseas. The report says that passage of such a bill will make it much easier for the outsourcing industry to use the H-1B visa to bring in foreign guest workers from abroad, thus reducing the need for “hiring of locals in [the] US” at higher wages. In other words, if the bill passes, firms could more easily bypass and replace qualified American workers with hundreds of thousands of cheaper H-1B guest workers.

Given the policy proposals by some senators, CLSA has advised clients to “overweight” the Indian IT outsourcing sector in their portfolios. This is a reversal of fortune mostly based on the prospect that the U.S. government will make it possible for the outsourcers to get access to three to four times more guest workers per year.Read more

As a follow-up to my earlier blog post on the responsibility for and consequences of sequestration, I want to underscore that the entirety of the Budget Control Act (the resolution to the 2011 debt ceiling crisis, which created the sequester) was about shrinking government, not fiscal responsibility. As I previously noted, sequestration will harm the economy, and perversely increase the debt-to-GDP ratio to 76.3 percent by the end of fiscal 2013, from 76.1 percent without sequestration. And by defunding public investment (a key driver of long-run economic growth) and delaying economic recovery, thereby incurring more long-run economic scarring, sequestration will leave a poorer country to service larger relative debts.

But even ignoring the macroeconomic damage wrought by sequestration, this across-the-board meat cleaver approach to cutting spending is often fiscally imprudent even on a programmatic level.

For instance, the Office of Management and Budget estimated that the Internal Revenue Service tax enforcement department would see $436 million dollars of budget authority sequestered in fiscal 2013. (This estimate predates the lame duck deal’s two-month delay, although the fiscal 2014 cut would be larger.) But by all estimates, marginal increases in funding for tax enforcement pay for themselves multiple times over. In fiscal 2012, IRS enforcement raised $50.2 billion in revenue, or $2.3 million per enforcement agent. Former George W. Bush administration IRS Commissioner Mark Everson estimated that every additional dollar spent would return $4 in revenue, for $3 in deficit reduction (Sawickey et. al 2005). That would imply that the full fiscal 2013 cut could add $1.3 billion to the budget deficit.Read more

As “sequestration” spending cuts seem increasingly likely to take effect tomorrow, and the blame game escalates over responsibility for the fallout, some incorrect revisionist history as well as (silly) pox-on-both-houses punditry merit comment.

If sequestration takes effect, it will be because congressional Republicans put draconian spending cuts in play, and have subsequently refused to replace those cuts with more sensible deficit reduction. And should sequestration take effect, this would not be an isolated case of economic policy malpractice: Congressional Republicans have consistently hamstrung efforts that economists overwhelmingly agree would have meaningfully helped lower the unemployment rate and instead advanced policies projected to decelerate near-term growth.

My colleague Josh Bivens and I recently chronicled at length the numerous, varying ways Congressional Republicans have deliberately obstructed a stronger economic recovery over the past four years. 1 This economic and budgetary obstructionism, in turn, has been a considerable factor explaining why U.S. economic growth has decelerated since mid-2010 and is currently far too slow to push the economy back to full health in the next few years, already more than five years after the start of the Great Recession.

What follows is a not-so-quick history of how we got to this week’s deadline.Read more

Here are some articles we read today, yesterday, and over the weekend:

• Unemployment Stories, Vol. 28: ‘I’m Inclined to Simply Disappear Into Silence’ (Gawker)
• Fix the Economy, Not the Deficit (The American Prospect)
• We’re 60 Percent of the Way to Simpson-Bowles! (Mother Jones)
• Study ties black-white wealth gap to stubborn disparities in real estate (Washington Post)
• What if the Outrage over Excessive Welfare Extended to the Tax Code? (Tax Policy Center)
• Fight Over Spending Cuts a Prelude to Budget Battles Ahead (New York Times)