Immigration Facts

Last week Marginal Revolution explained that the typical foreign-born adult resident of the U.S. is more likely to participate in the labor force than the typical native-born American and that the participation gap is “especially high among men”.  In fact, there is only a participation differential among men.  The labor force participation rate of foreign-born women is lower than for native-born women.

It is also worth noting that the labor force participation differential is strongly related to men’s educational attainment.  Labor force participation rates are higher for immigrants when comparing men with less than a college diploma.

For men age 25 to 64 who did not complete high school the participation rates are 63.3% for native-born and 87% for foreign-born men.  For high school graduates the participation rates are 79.9% for native-born and 89.5% for foreign-born men.  The participation rate differential for adults with some college is 3.4% and the gap is negligible for adult men with a college degree or more.

Less educated native-born men are significantly less likely to participate in the labor force than foreign-born men, regardless of educational attainment, and native-born college graduates.  The labor force participation differential between immigrant and native-born men is due to the unusually low participation rates of less educated men who were born in the United States.

Why Does David Stern Think Defense is Boring?

Real sports fans appreciate excellent defense.  Nonetheless, commissioners of professional sports leagues seem to think that fans are bored by defense.  David Stern of the NBA typifies this mindset.  The NBA All-Star Weekend is a showcase for its stars and it’s all about offense.  I understand that the All-Star game is an exhibition not a competition, but whatever they played last night in Orlando looked nothing like professional basketball.

David Stern, who became Commissioner in 1984, has used the All-Star weekend to market the NBA.  A big change was the introduction of the slam dunk contest in 1984.  The dunk contest used to feature basketball’s biggest stars making shots that could conceivably occur in game situations.  The contest no longer attracts stars and now features dunks over props such as cars and motorcycles.

All-Stars in the exhibition game play as much defense as the props in the slam dunk contest, but that wasn’t always the case.  Before 1984 the average score in an All-Star game was about 20 points or just 9 percent higher than in an average regular season game.  Since 1984 the total point differential between the All-Star game and the regular season has steadily increased by 1.6 points per year.  Over the past 6 years the average All-Star score was 83 points higher (42 percent) than in the regular season.  Last night’s game produced 111 more points (58 percent) than we have seen this season.

The dunk contest and the All-Star game have become caricatures of the sport of basketball.  I wish the NBA would give basketball fans more credit and recognize that we appreciate all aspects of the game – including defense.

Discriminating Oscar Voters

Hollywood seems more politically correct than most industries, so it surprises me that the Academy of Motion Pictures Arts and Sciences still segregates acting awards for men and women.  Oscar voters are capable of evaluating acting performances in comedies and dramas, even though the films had different screenplays and directors, but apparently are unable to compare the acting performances of men and women.  I am not sure what other industry could plausibly make the claim that the job performances of men and women could not be fairly compared.

In addition to gender segregation of awards, there is a noticeable age difference in Best Actor and Best Actress winners.  In the history of the Oscars the average Best Actor winner is more than eight years older than the average Best Actress winner.  Adrien Brody is the youngest man to win an Oscar for Best Actor; he won for The Pianist 22 days before his 30^th birthday in 2003, and is the only man under 30 to win the award.  In contrast, 29 of 84 Best Actress Oscars were awarded to women under the age of 30.  Jodie Foster and Luise Rainer won two Best Actress Oscars before they turned 30.

Since 1967, when the Federal law was passed prohibiting discrimination in employment against workers age 40 and above, about 70% of Best Actor winners have been 40 or older compared to one third of Best Actress winners.  Actresses age 40 and above don’t win as many awards because they are much less likely to be nominated.  Since 1967 less than 40% of women’s nominations were to actresses age 40 and above compared to 65% for actors.

The age distribution of actors and actresses in the U.S. are roughly comparable (according to the American Community Survey).  In fact, actresses are slightly older than actors, on average, and men tend to be over-represented in the under 30 age group in this occupation.

The statistics cited above do not necessarily mean that members of the Academy of Motion Pictures Arts and Sciences are discriminating against actresses age 40 and above.  The Oscar nominations and awards may well be decided on merit.  It is important to recognize, however, that if a private employer displayed such dramatic gender differences in job evaluation or promotion rates by age, the Equal Employment Opportunity Commission could be expected to question the selection process.

Hollywood appears to be the bastion of liberalism, but the facts suggest otherwise.  Only four women directors have ever been nominated for an Oscar and Kathryn Bigelow (2009) is the only woman to win.  Women have their own set of acting awards, a holdover from a time that the rest of the U.S. economy has left far behind.  It would be interesting to see men and women compete for Oscars in the same categories, not just for writing, editing and directing, but for acting, as well.  I am not sure why there have been so few nominations and Oscars for actresses age 40 and above, but the differences from men are stark and deserve more scrutiny.

Swing States

As I watch the Michigan Primary results on Tuesday night, I will be focused on exit polls about the state of the economy in Michigan.  Do voters in Michigan feel like the economy is on the rebound?  Will voters in other key swing states be optimistic about the economic recovery by November?

Earlier this month Ryan Avent of the Economist posted a chart showing changes in unemployment rates in swing states.  Although the chart seemed to show that labor markets are recovering faster in swing states, this may not be the case.  In an earlier post  I showed that much of Michigan’s drop in the unemployment rate is due to a declining labor force.  Today Tami Luhby of CNN Money made a similar point – the unemployment rate in Michigan and other swing states is falling, in part, because of workers leaving the labor force.

Good news or bad news can cause the unemployment rate to fall.  A better barometer of the labor market in swing states is the percentage change in payroll employment.  The following chart lists swing states and their employment changes over the past four years.

The chart indicates that Nevada, Florida, Michigan and North Carolina have lost the most jobs (in percentage terms) since December of 2007.  Moreover, ten of fourteen swing states have experienced a larger decline in employment than in the rest of the U.S..  Michigan, Florida and Ohio are the only swing states where employment grew faster in the past year than in non-swing states.

If one looks at the percentage change in employment, rather than changes in the unemployment rate, labor markets appear to be weaker in key swing states than in the rest of the U.S.  The strength of the economic recovery, and employment growth, in these fourteen states may determine the outcome of the Presidential election.

Title IX and Fairness

Title IX, the 1972 Educational Amendments to the Civil Rights Act, has become synonymous with gender equity in sports.  The law, as interpreted, requires universities to field equal numbers of men’s and women’s teams.  Title IX has transformed women’s sports in high schools and universities but has led to some unintended consequences.  By requiring that women and men field the same number of Division I teams in college sports, without regard to the available talent pool, Title IX may be causing greater inequality in outcomes among women’s teams.

Gender equity in youth, high school, and college sports is an admirable goal.  Many young women have benefited greatly from the opportunity to participate in organized sports.  My daughter is one of them.  She was an All-American in youth track and field and cross country, runs competitively in high school, and is likely to continue her competitive running in college.  Women should have an equal opportunity to participate in organized sports in educational institutions.

There are, however, different ways to define gender equity in sports.  The courts have decided that equity is achieved through equal numbers of women’s and men’s teams.  The quality of athletic competition is not “equal” across sports divisions just because the divisions have the same number of teams.  Sports leagues want parity; athletic competition is enhanced by comparably matched teams.  The overall quality of competition is diminished if a small number of teams consistently defeat their opponents by a wide margin and win a disproportionate share of games and championships.  Unfortunately this appears to be more common in women’s collegiate sports than in men’s.

Title IX encourages universities to field more women’s teams even if expansion does not enhance the quality of the competition for participating athletes.  The more women’s athletic scholarships a school awards and the more women’s teams it fields, the more men’s teams and scholarships it can have.  There are 333 NCAA Division I Women’s Basketball teams because this is required for gender equity, not because there are 4000 women talented enough to compete at the same level.

There are many statistics I could cite to demonstrate that the talent pool in women’s college sports may be spread too thin.  The University of North Carolina won 21 of 30 NCAA Soccer Championships.  Georgia and Auburn have won 9 of the last 12 Division I Swimming Championships and finished second another 8 times.  The University of Connecticut women’s basketball team recently won 90 straight games and Stanford and Penn State have won 10 of the last 20 Division I NCAA Volleyball Championships and finished second another 8 times.

The best comparison may be between Division I women’s and men’s basketball.  In the NCAA tournament the top four women’s seeds lose less than 2% of their opening round games while the top four men’s seeds lose about 10% of their opening round games.  The lack of parity in women’s basketball is also evident from point differentials in the regular season.  The following chart compares the average point differentials between ranked and unranked teams and between teams ranked 1 to 10 and those ranked 11 to 25 over the past two regular seasons.

Women’s games are often characterized by unequally matched teams and lopsided scores.  This may be because the available talent pool for women’s basketball is spread too thin.  If one cares about both the quality of the competition and participation the optimal number of women’s Division I basketball teams may be less than the number of men’s teams.

Equal opportunity, according to the courts, is achieved by equalizing teams and scholarships by gender.  Gender equity in the quality of competition will not be achieved in this way if men’s and women’s talent pools aren’t comparably deep.  I would like to see more emphasis on the quality of competition rather than simply the quantity of athletes and teams.  Women’s collegiate sports should provide the greatest aggregate benefits to participants even if that might mean fewer teams at the Division I level.

Infrastructure Spending and the Davis-Bacon Act

It’s been three years since the American Recovery and Reinvestment Act was signed into law.  Only 7% of the $840 billion in stimulus funds were allocated to transportation and infrastructure projects.  White House Budget Chief of Staff Jack Lew  recently said that a “crumbling infrastructure is not the way to build an economy that can last.”  The Obama Administration  has proposed spending hundreds of billions of additional dollars on roads, bridges and schools.  Common sense says that the Federal government should undertake those infrastructure projects where the benefits exceed the costs.  Unfortunately the Davis-Bacon Act inflates costs by requiring Federal contractors to pay the prevailing wage (plus fringe benefits) on construction projects.

Government infrastructure spending makes sense because borrowing costs are low; the 10 year Treasury bond rate is about 2%.  This argument would be bolstered if labor costs were also relatively low.  The Davis-Bacon Act, however, forces government contractors to pay artificially high wages and benefits.  This means that fewer projects will be completed for each billion dollars budgeted for infrastructure.

If the wages paid on government construction projects could freely adjust to market conditions, labor costs would be much lower in many parts of the U.S.  The following figure shows construction employment in three states particularly hard hit by the 2008 recession: Florida, Michigan, and Nevada.  Construction employment is down 40% to 62% from its pre-recession peak in these states.

The large demand reductions in the Florida, Michigan and Nevada construction industries put downward pressure on construction wages.  Davis-Bacon prevents this from lowering labor costs for Federal projects.  The U.S. Department of Labor sets the prevailing wage in each area based on surveys of unions and employers that are administered by its Wage and Hours Division (not the Bureau of Labor Statistics).

The 2012 prevailing wage in Las Vegas (Clark County) is about $50 per hour for carpenters and $60 per hour for electricians and power equipment operators.  I presume there are thousands of unemployed and underemployed construction workers in Las Vegas who would be willing to work for less than $50 per hour.

Prevailing wages that are unresponsive to current labor market conditions are not limited to Las Vegas.  The following figures show prevailing wages for plumbers and elevator mechanics in Wayne County, Michigan (Detroit) and Broward County, Florida in 2004 and 2012.  Since 2004, the prevailing wages of elevator mechanics increased by about 80% in Wayne County and by 90% in Broward County.  Over the past 8 years, plumbers’ wages increased by 40% in Broward County and by 67% in Wayne County.  These substantial increases occurred despite the collapse of the construction industries in Michigan and South Florida in the past decade.

The Works Progress Administration (WPA) had a much different approach for infrastructure projects from 1935 to 1943.  WPA wages were twice welfare benefits, but far less than the union pay scale, so that more workers could be employed.  The WPA also used excessively labor intensive methods to increase employment per project.

Inflated infrastructure costs are undesirable whether they are due to artificially high wages or an inefficient production process.  Ultra-Keynesians, like Paul Krugman, may advocate infrastructure spending as a stimulus even if production is inefficient or labor costs are inflated.  After all, Krugman recently argued that government spending for protection from imaginary space aliens would be beneficial.

The Federal government should undertake infrastructure projects where benefits exceed costs, allocate resources efficiently, and pay market wages.  The projected benefits of infrastructure projects should be based on the merits of each project not supposed stimulus effects.  Project costs should reflect market conditions.  Requiring contractors to pay their employees inflated prevailing wages produces no more stimulus than would a requirement that domestic bondholders receive 5% rather than 2% interest.  Davis-Bacon prevailing wage requirements were suspended in the aftermath of Hurricane Katrina.  The Obama Administration should consider suspending Davis-Bacon again so that contractor wages reflect market conditions, more unemployed construction workers can be hired and more worthwhile infrastructure projects can be funded.

Discouraged Workers

The unemployment rate has declined by 8/10 of one percent in the past five months, but part of this decline is due to an increase in the number of discouraged workers rather than unemployed workers finding a job.  Officially, unemployed workers must be jobless and have looked for work in the past 4 weeks.  During the recession and weak economic recovery many unemployed workers became discouraged, stopped searching for work, and are no longer counted as unemployed.  As the economy gains strength they will resume their job search and this could prevent the unemployment rate from falling in 2012 or even cause it to increase.

The excess fraction of the working age population that is jobless is the employment gap.  This gap should be calculated controlling for age, gender and time trend because of differences in the propensity to work across demographic groups.  Adding the number of jobless workers represented by the employment gap to the natural or typical unemployment rate produces an alternative to the official unemployment rate.

The figure below shows employment/population for men age 35 to 44 and 45 to 54 from 1980 to 2011. The ratios for both groups have trended down by about 1% per decade and are about 4% below their trend values as of January 2012.

The “natural” unemployment rate for men age 35 to 44 is probably close to 3.4%, the average rate during the last half of the 1990s and from 2005 to 2007.  If every jobless worker in the 4% employment gap was added to the “natural” rate the unemployment rate would be 7.9% (rather than 6.4%) in January 2012.  Comparing January 2011 to January 2012 indicates that most of the 1.1% drop in the official unemployment rate was due to an increase in discouraged workers rather than a reduction in the employment gap.  The decline in the employment gap over the past year would have reduced the unemployment rate by just 0.4% (8.3% to 7.9%).

Men age 45 to 54 have a “natural” unemployment rate of about 3.2%, the average during the late 1990s and from 2005 to 2007.  The adjusted unemployment rate, which adds jobless workers from the employment gap to the “natural” rate, is 7.2% (rather than 6.4%) in January 2012.  About 60 percent of the 1.9% drop in the official unemployment rate from January 2011 to January 2012 was due to an increase in discouraged workers rather than a narrowing of the employment gap.

The unemployment rate is normally expected to decline as the economy strengthens but this may not occur in 2012.  It appears that much of the decline in the unemployment rate over the past year was due to workers becoming discouraged rather than finding jobs.  The official unemployment rate could increase by 0.8% to 1.5% if these discouraged workers resumed their job search immediately.  It is more likely that discouraged workers will gradually re-enter the workforce keeping the unemployment rate stubbornly high even as the economy strengthens.

New Jobless Claims Cast Doubt on Recovery Winter

Everyone seems to be impressed by the low levels of new unemployment insurance claims that have been filed in 2012.  I look at the numbers and notice how high new claims are relative to layoffs.  The data suggest that nearly everyone who has lost their job through a layoff or reduction in force files for unemployment benefits.  Before the recession, that was not the case.  Job losers are much more pessimistic about their chances of finding a new job than they should be if the economy was enjoying a recovery winter.

A little over two million new claims were filed in the first four weeks of the year.  That’s about 12% less than were filed over a comparable period in 2011, and 27% less than in 2010.  I am not surprised by this decline because there must be layoffs before there can be new jobless claims.  Unemployed workers must be job losers to be eligible for unemployment insurance.  The BLS labor turnover survey (JOLTS) indicates that layoffs have fallen even more dramatically than new jobless claims since the recession.

The following chart shows new unemployment insurance claims and layoffs each month between 2001 and 2011.  The figures are not seasonally adjusted – layoffs and UI claims spike up in January and are lowest in the fall every year.

Between 2001 and the fall of 2008 there were 19% fewer jobless claims than there were layoffs.  A disturbing pattern has emerged beginning in the fall of 2008.  Since November of 2008 about 11% more people filed for UI benefits than there have been job losses through layoffs.  Some of the excess new claimants were likely deemed ineligible for unemployment insurance.  Even so, the fraction of laid off workers who rely on unemployment insurance is at an all-time high.  This suggests job losers are pessimistic about their prospects of finding a new job and is a leading indicator that, despite what some are saying, it will be a while before hiring picks up.

NBA Players Can’t Shoot Straight after the Lockout

All the excitement generated by Jeremy Lin seems to have distracted fans from what’s really happening this NBA season.  Charles Barkley is paying attention, and he said “As a NBA fan, I want to apologize to the fans.  I cannot believe how bad the NBA is right now.” Offenses are performing poorly this season and there is a simple explanation, the lockout that delayed the start of the season and all but eliminated team practices.

This is the second NBA lockout serious enough to result in limited training camps and a shortened regular season; in 1999 the NBA played a 50-game schedule.  NBA lockouts reduce shooting accuracy and these negative effects may persist for several seasons.  Basketball productivity probably declined because pre-season practices, mid-season practices and rests days were curtailed in order to fit 66 games between Christmas and late April.

The following figure illustrates the average effective shooting percentage in NBA regular seasons from 1980, when the 3 point shot was introduced, to the current season (so fare).  The effective shooting percentage is a weighted average of 2 point and 3 point shooting percentages, where each 3 point shot receives one and a half the weight of a 2 point shot.  The figure indicates that although shooting accuracy varies from year to year, it dropped shortly after both work stoppages, and remained lower for several seasons after the 1999 lockout.

I estimated a simple regression that allows for differences in shooting accuracy among teams and correlation in the fluctuations in a team’s shooting percentage from one year to the next.  The regression model suggests that lockouts cause a 1.5% decline in the effective shooting percentage in the first season after a lockout.  The model also predicts that shooting percentages will remain lower because of the time series correlation in shooting accuracy.

The statistical model can be used to predict how the most recent lockout will reduce NBA scoring over the next few seasons.   Combined scoring by both teams is expected to drop by 5.5 points in 2012 and 3.3 points in 2013 due to the reduction in shooting accuracy.

NBA coaches and teams can adjust strategies to mitigate the impact of the prolonged lockout.  For example teams can attempt more (or fewer) 3 point shots and slow down (or speed up) the pace of play.  If these adjustments are made scoring reductions could be somewhat smaller than the model’s predictions.

Some fans believe that the NBA’s 82-game regular season is too long, so that a silver lining of the 2011 lockout is a shortened 66-game schedule.  Whether or not the regular season is too long, compressing a 66 game season into four months has a negative impact on offensive efficiency.  Practices and rest days are important, even for the world’s best athletes competing at the highest level.  The elimination of rest days and practices appears to be relatively more important for basketball offenses.

Part-Time Recovery

The unemployment rate and the monthly change in total payroll employment are clearly the most widely watched labor market indicators.  Neither of these statistics measures an important consequence of the 2008 recession: adult men are working part-time at record rates.  As the labor market turns the corner in 2012 the most important leading indicator may be the fraction of adult men employed in part-time jobs.

The following figure shows that the fraction of employed men who work part-time nearly doubled between 1986 and 2011.   By 2011 about one third of employed men age 20-24 worked part-time, and 7.4% of employed men age 25-54 held part-time jobs.  About 80% of the increase in part-time work for the 25-54 age group occurred during the 2008 recession.  About 2.5 million full-time jobs were lost during the recession for men in the 20-24 and 25-54 age groups.  It is less well known that the recession caused about 1.5 million adult men in these age groups to switch from full-time to part-time work.  The patterns are somewhat different for women, but I will leave that for another post.

The following chart shows that the overall employment to population ratio dropped by 11.4% for men age 20-24 and 6.7% for men age 25-54 between January 2008 and January 2010.  These large employment declines understate the depth of the downturn because they treat all jobs the same, whether they are part-time or full-time.  The full-time employment to population ratio dropped by 13.8% for men age 20-24 and 8.9% for men age 25-54.  These precipitous drops in full-time employment rates were accompanied by increases in part-time employment rates of just over 2%.

The labor market has been slowly recovering since January of 2010.  The following chart shows that the overall employment to population ratio for men age 20-24 grew by 4% over the past two years.  The length of the workweek did not change much for these younger men because about two thirds work full-time, and full-time employment growth was about double part-time employment growth.

The employment to population ratio of men age 25-54 has grown by 1.5% since January of 2010.  The full-time employment rate increased by 2% while there was a slight decrease of 0.5% in the part-time employment rate.  The length of the average workweek increased slightly over the past two years these men as some part-time jobs were replaced by full-time employment.

A necessary component of a solid recovery is the transition to full-time work for the (at least) 1.5 million adult men who work part-time jobs because of the weak economy.  This change will not appear as an increase in payroll employment or a reduction in the unemployment rate.  A key leading indicator that that the economic recovery is finally gaining strength will be more substantial decreases in the fraction of adult men who work part-time.