Dean Baker

Recent Articles

Missing Fact on British Health Care

The New York Times had an interesting piece on the poor state of the dental care provided by the British public health care system in its Sunday paper. The article reports that people face long waits for even emergency dental care, and that many now turn to private dentists or go to foreign countries for treatment. Readers naturally feel sorry for the plight of Britons with bad teeth and are thankful that here in the United States we have an efficient private health care system. The key fact missing in the story is that Britain spends less than 40 percent as much person for its health care as the United States. Whatever the relative merits of the British mechanism for providing health care and the U.S. system, it would be truly astonishing if the British system could best the U.S. in every category, spending just 40 cents to our dollar. (Britain does much better on life expectancy for its 40 cents.) This article is part of a long series of articles in the New York Times which could go...

Are Wages Rising?

Like everyone else, the media have been confused on this basic question, with the main data sources providing very different answers. Last Friday, the Bureau of Labor Statistics (BLS) released the employment cost index (ECI) which showed a sharp slowing in the rate of nominal hourly compensation growth in the first quarter to an annual rate of just 2.4 percent. This is well below the rate of inflation, which, depending on the course of gas prices, will be in the range of 3.0-4.0 percent for this year. On Thursday, BLS released productivity data, which showed that hourly compensation was rising at an annual rate of 5.7 percent for the same quarter. Further complicating the picture is the employment report that BLS released this morning showing wages rising at a 4.7 percent annual rate over the most recent three months (compared to the prior 3-month average). The picture is not quite as confusing as this may appear. First, the quarterly compensation data from the productivity report...

Correction: Productivity Growth Clocks in at 3.2 Percent

I plead guilty to the same sort of sloppiness I have noted elsewhere. Earlier this week I commented on the coverage of Commerce Department's release of data for March on consumer spending and prices. I then noted that the consensus forecasts for first quarter productivity growth appeared to be too high. I based this on the fact that the hours data reported in the monthly employment reports indicated that hours were growing at close to a 4.0 percent annual rate in the quarter. As it turned out, hours growth was reported as 2.5 percent. What went wrong? Well, the hours data that go into the published index in the employment reports are for production and non-supervisory workers in private non-farm employment. That means that the index excludes the impact of changes in employment and hours for production and supervisory workers. (There are also some private sector workers who are not in the business sector, for example workers in non-profit universities or hospitals.) Since the vast...

Corruption in the Pharmaceutical Industry: Why Is Anyone Surprised?

The New York Times has run many excellent articles over the years describing various forms of corruption in the pharmaceutical industry. (The latest describes the battle over monitoring the prescribing practices of individual physicians.) The one thing missing from these articles is any economic analysis. Every person who has suffered through an introductory economics class has heard the story about how government intervention in the market leads to corruption. Economists always rant above how trade protection or various forms of government regulation inevitably lead to gaming of the system and rent-seeking behavior. If we expect to see such corruption when a tariff or quota raises clothes prices by 15-20 percent, why wouldn't we expect to see such corruption when drug patents raise prices by 200 percent or more? Calling government protection a "patent" or defining it as an "intellectual property right" does not change the economic model one iota. The sort of incentive for corruption...

Open Borders Versus Die at the Border: Can't Experts See the Difference?

I just heard economics commentator Chris Farrell on Marketplace talking about the United States open border immigration policy, under which ambitious hardworking immigrants can freely enter the country. Excuse me, but what planet is this guy on? Open borders mean that a Mexican doctor, an Indian lawyer, a Brazilian economics commentator can come across the border in any form of transportation they like, and work wherever they like, at whatever pay they are willing to accept. The United States does not have this policy or anything like it. It has a policy that sharply limits legal opportunities for working in the country. The policy is that if you are willing to risk death in a dangerous border crossing and risk facing deportation at any time, then you can work in some sectors of the economy illegally. Doctors, lawyers, and economic commentators in the developing world are not willing to take these risks. Furthermore, the businesses that hire such people are not willing to risk the...

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