Friday, February 21, 2014

Wall Street Journal & New York Times cover same event. In one paper, audience loves Christie, in other they hate him

By Marc Jampole

Today we saw a duel for spin control between our two most prominent newspapers, the New York Times and the Wall Street Journal.

The spin concerned how to interpret the response that New Jersey Governor Chris Christie received in his first town hall meeting since the Washington bridge scandal burst into national consciousness a few months ago.  It was the 110th town hall meeting Christie has held since assuming the mantle of Governor of the Garden State. These town hall meetings have come to symbolize the image of Christie that the mainstream media liked to portray before Bridgegate: open, direct, frank, straight-talking, action-oriented. This town hall meeting took place somewhere in Republican-leaning Monmouth County near the Jersey coastline that Superstorm Sandy battered.

The headlines in the print versions say it all:
WSJ: Christie Style Is on Display” (which in the Internet version became the more objective “Christie Hosts First Town Hall Since Scandal”)
NYT: “Christie Finds Hostility in Setting He Once Ruled (which was also changed in the Internet version to “For Christie, Awkward Return to a Setting He Once Ruled” 

The first sentences of the respective stories—in print and online—seem to be describing different events:

He consoled displaced Superstorm Sandy victims, joked about his undying love for Bruce Springsteen and even used salty language at times as he bantered with detractors and admirers.
It was mostly vintage Chris Christie on Thursday at the Republican governor's first town hall meeting since last June

When Chris Christie started to talk over a complaining questioner, a signature tactic of the bellicose, pre-scandal governor, the audience here briefly turned on him.
“Answer the question,” some shouted.
When he took a microphone from a long-winded speaker, the man startled Mr. Christie by snatching it right back.

Each story builds on the basic idea established in the print version of the headline and the first paragraph. The NYT version basically shows a hostile crowd fed up with Christie. The WSJ version depicts an accomplished and popular politician using his skills to have the audience eating out of his hand.

The rival newspapers even differ in where they say the meeting took place:  the dateline in the Times reads Port Monmouth, NJ, while the dateline in the Journal says the meeting occurred in Middleton, NJ. When you input the two place names into Google Maps, they show up as being about four miles away from each other, but we’re definitely talking about the same meeting. We can recognize three or four of the same people in the same position relative to the meeting room in the photos used in both papers.

Which story is true? As a progressive who abhors the crony capitalism at which Christies seems to excel, I want to side with the Times version of the facts and a careful reading of the two stories does reveal that the Times has more specific detail. But based on my decades as a news media analyst, I’m guessing that they’re both wrong—and they’re both right. 

The centrist New York Times and the right-leaning Wall Street Journal are both trying to define the storyline going forward: The Journal wants Christie to recover and be the victorious GOP hero in 2016, whereas the Times—I’m not sure what the Times wants when it comes to the Christie story, but let’s assume that despite liking Christie in the past, it has turned against the big guy because of Bridgegate.

We see different media and different political leaders and parties vie to control public perception of a story all the time. Centrists and left-leaners saw only the mostly good news in the Congressional Budget Office analysis of the impact of raising the minimum wage to $10.10 an hour on various aspects of the economy, whereas right-wingers clutched to the probably wrong estimate that such an increase would lead to a three tenths of one percent increase in unemployment. The rollout of the Affordable Care Act and the investigation of the Benghazi incident are two other recent examples of different parties and media outlets trying to place a different spin on the same facts.

But just as often, the entire mass media goes with the same spin, and usually it’s wrong. Let’s take two examples from four years ago:
  • All the media invoked the Glenn Beck rally on Constitution Mall in Washington, D.C. as proof of the ascendancy of the Tea Party in the lead-up to the 2010 Congressional elections and as proof that the media should be covering only Tea Party campaigns. But the most reputable sources estimated that the rally attracted 85,000, the same number who attended the mostly ignored and forgotten union-oriented rally in favor of progressive policies at the same location a few weeks later. Why was one the symbol of a political sea change while the other wasn’t?
  • A 2010 study by the National Center for Health Statistics revealed that that more than 61% of all women live with someone else in a romantic or sexual relationship sometime in their lives without the benefit of marriage. All the news media, top to bottom, ignored or buried this finding, preferring instead to report that the study showed people who cohabit are 6% less likely to be together 10 years after marriage than people who don’t live together before getting hitched. Instead of presenting a truly dramatic change in social mores, the mainstream media preferred to depict a threat to the institution of marriage.

In both of these stories, myths and political desires superseded a concern for the facts or their real significance. These stories exemplify my belief that at the end of the day, most mainstream media really do agree on the big stuff. Before questioning this opinion, try to find the last time the Times published any story that supported or discussed lifting the cap off income that must be assessed the Social Security tax. Or go back to see how the Times initially covered the Occupy Movement or the proposal by New York Mayor (then candidate) Bill De Blasio to tax those who make a million a  year or more to pay for universal pre-K.   The Times’ position on Occupy and pre-K funding was similar to the Wall Street Journal’s until the people spoke and made their position clear.

What’s a poor truth-seeker to do? For one thing, we should be aware of the predilections and prejudices of all media. We should learn to suspect the reports when they seem to go against common sense or they don’t have a lot of specifics. Beyond that, it’s probably wise to read a variety of media from the left, right and center, and to make sure that the stories come from different sources. For example, you can typically read hundreds of versions of the same story using the same facts but with slightly different headlines every day, since most of the stories we see are reprints, interpretations or revisions of original sources. Quite often whether you read the story in the St. Louis Dispatch or the Los Angeles Times or see it on the local CBS affiliate in Denver, it’s the same story written by the same Associated Press, Gannett or Bloomberg News reporter. If you really want to know what the news is and what it means, you’ll have to consult several independent sources, something that’s much harder to do since the consolidation of ownership of media outlets. 

Wednesday, February 19, 2014

CBO estimate on additional unemployment from raising minimum wage is probably wrong

By Marc Jampole

The announcement by the bipartisan Congressional Budget Office (CBO) that raising the minimum wage to $10.10 an hour will lead to 500,000 jobs disappearing is just wrong. Now I’m not saying that the report’s authors are lying or stupid, just that they are making the wrong assumptions or looking at the numbers in the wrong way.

The CBO admits that its numbers are a guess at best, but that admission is buried in the fine print.  In Appendix A to its report, CBO says that it reviewed a large body of research on what it calls “employment elasticity.”  In economics, elasticity is how sensitive one economic variable is to another. A simple example of elasticity is price: If we double the price of a product, how many fewer people will buy it? Clearly, doubling the price of something that people need or want very badly such as milk or a college education will have less impact on demand than doubling the price of a luxury, such as a meal at a fancy restaurant or jet skis. Or consider what would happen if twice as many people suddenly wanted something of which there was a finite amount, like gold in times of economic turmoil. But twice as many people wanting Doritos might not lead to such a dramatic rise in the price of each box, because, as the man says, “We’ll make more.” Many factors go into creating a relationship between two economic variables.

One truism of economics is that the higher the price the lower the demand. Economists accept it as a given, much as mathematicians accept as a given that the shortest distance between two points is a straight line. But in some cases, demand is more elastic (stays the same or close to the same unless there is a steep price increase), as college education has proven to be.

“Employment elasticity” measures how the market will respond when the minimum wage is raised (or lowered).  But all the measurements use methodologies, each of which employs a different series of variables and makes a different set of assumptions. Appendix B of The CBO’s report lists dozens of methodologies and studies of methodologies that it considered. Some concluded that raising the minimum wage would have a negligible effect on unemployment; some said as many as a million jobs would be lost.  Instead of weighing the relative merits of each, the CBO took an average. That’s what the 500,000 is—the midpoint in a bunch of generated by a  bunch of different methodologies. And the methodologies only measure teen unemployment! CBO uses another set of methodologies to infer the effect of raising the minimum wage for the entire economy based on what happens to teens, our most inexperienced and unskilled workers.

I’m inclined to believe the studies that show a minimal impact on unemployment by raising the minimum wage to $10.10 and seven Nobel prize-winning economists, four former presidents of the American Economic Association and more than 600 other economists agree with me.  The Nobel laureates and professors are going to give you their mathematically based models. Let me tell you what happens in the real world.

In the real world, a business increases its profit by either growing its market or lowering costs. Every successful company is constantly looking at both. Part of cost-cutting is to make sure your labor costs are as low as possible. So in theory—let’s call it the efficient company theory—no business ever hires someone they don’t need and can’t make money from because it would unduly raise costs.  In a like manner, no business ever lets someone go just because they cost too much without replacing that person because they need someone to do the job (having not hired too many to begin with).

Now the real world is a little messier, as the following examples suggest: A large business may reevaluate labor needs every six months (or two years) and within the six month period have too many (or too few) employees but hasn’t gotten around to making the routine adjustment. A small business owner may have lost a large share of her business, but is reluctant to lay off people in case business turns around in a month or two. A new labor-saving technology is on the market and a business is evaluating it.  A company will not refill a position once someone retires. Or how about the real estate profession during the bubble that was destined to end? In all these cases, companies are carrying excess labor, and a rise in the cost of labor may make them change their minds quickly.  These job losses aren’t caused by the increase in wages. The job loss was activated before the increase in wages.

I would consider these job losses to be noise or leakage in the economic system, similar to the concept of the natural rate of unemployment, which is the unemployment rate that occurs with full employment, stemming from the fact that there are always people looking for jobs and employers looking for workers. I’ve read that the natural rate of unemployment used to be 4% but is now higher.

What I’m saying is that any increase in unemployment because of an increase in the minimum wage is nothing more than noise (or friction as Milton Friedman and others called it). I’m not saying that the noise or friction that prevents companies from being one hundred percent labor efficient is that same 4+% as the friction that explains why unemployment never falls below a certain floor. But even if it were only one tenth as much, that would still compute to hundreds of thousands of jobs that these methodologies may be counting as losses because of a rise in the minimum wage to $10.10. The noise factor almost certainly explains why some estimates are so much lower than others.  

The 500,000 who CBO is predicting will lose their jobs if the minimum wage reaches $10.10 would raise unemployment by three tenths of a percent. That’s 500,000 out of more than 166 million jobs. So even if CBO is right, it sounds like they are measuring noise for the most part, which in this case means the number of jobs that would have been lost no matter what.