Will driverless trucks be the end of truck drivers?

June 6, 2016

As I’ve written before, it’s important for our policymakers and elected leaders not to lose their heads over technological advances in the economy. This recent headline—“The driverless truck is coming, and it is going to automate millions of jobs”—does not help.

While it is true that new trucks are coming, the author exaggerates when he predicts a “400 percent price-performance improvement in ground transportation networks.” Without citing his source, he asserts that 75 percent of long-haul trucking costs are labor costs. That figure is nonsensical: depreciation, fuel, insurance, profits, interest costs, and maintenance consume a much larger share of these shipping costs. The Bureau of Economic Analysis in its industry studies shows that just 26 percent of transportation industry costs in 2014 were due to labor compensation.

Furthermore, not all of the 1.6 million long-haul drivers will lose their jobs. First, many drivers are part of the unloading process. Second, automated driving technology is not very good in unusual circumstances (e.g., changing lanes in traffic jams, taking directions for construction and other detours, fixing flat tires, etc.). Third, the notion of convoys of trucks driving in close proximity at a fixed speed of 45 miles an hour (to save gas) creates risks for cars trying to exit the highways. 

For these reasons, just as there are extra workers on trains, humans will have to be present to respond to these out-of-the-ordinary events. Total job losses will therefore be considerably less than the total number of driver jobs.

But losing jobs in one area does not have to lead to overall job losses. Ever since the Luddites tried to smash the machines that reduced their numbers, total employment hasn’t gone down—it has only been reorganized into different areas. In the hundred years from 1860 to 1960, agricultural employment went from 60 percent of the work force to five percent without leading to massive unemployment, which tended to move up and down in response to the business cycle.

In the 1950s and 1960s, many feared that the introduction of new manufacturing machines would drive up unemployment; in November 1961, Time ran a major story on the “automation jobless.”

Indeed, the share of manufacturing employment declined from 35 percent in 1950 to 15 percent in 1990 (before the latest rounds of trade agreements). And, over the last several decades in the United States, containerization reduced dock side employment and did away with many clerical jobs. Yet, before the 2008 financial crisis, we had incorporated huge numbers of women and immigrants into the labor force while maintaining high employment among non-elderly adults.  

In this presidential electoral cycle, there have been many proclamations about how badly the economy is performing. While few candidates have addressed technological unemployment itself, claims that the economy will no longer provide enough jobs in the future are part of a broader narrative that instills worry about the present and the future.

In contrast, the positive news is that we have recovered from the financial crisis of 2008 and are doing better than most other advanced industrial economies.

Finally, while many people profess that the economy as a whole isn’t doing well, a recent survey from the Federal Reserve Board found 69 percent of Americans said that they were “living comfortably” or “doing okay” and only just over 9 percent were “finding it difficult to get by.” To me, none of this suggests that we should worry about driverless 18-wheelers any time soon. 

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From TaxVox: The best—and worst—tax ideas of the 2016 presidential campaign

April 15, 2016

It is only April and we have heard presidential candidates propose some of the biggest and most ambitious tax plans in modern US history. Donald Trump is proposing the largest tax cut ever, and Ted Cruz is not far behind. Bernie Sanders has proposed the biggest tax increase since World War II.

But it isn’t just the size of the tax changes. We’ve already seen two forms of broad-based consumption taxes, a carbon tax, and two financial transactions taxes. In a typical presidential election season, any one of these would be a headline-grabber. This year, they have all been in play—though getting remarkably little attention.

Yesterday, I joined a group of tax experts to take stock of the candidate’s tax plans. At a Tax Policy Center panel, they described the most interesting tax ideas of the campaign so far. Some are good. Some are terrible. Some are, well, thought-provoking.  Here are some of the best and worst tax ideas of the 2016 campaign, according to our panelists, Len Burman, Elaine Maag, and Joe Rosenberg of TPC and Adele Morris of the Brookings Institution. In no special order, they are:

Read the rest on TaxVox.

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Seven myth-busting facts on undocumented immigration

March 24, 2016

Unauthorized immigration has become a prominent topic in the 2016 election. In recent debates, town halls, and television ads, heated rhetoric has often won out over the facts. In this post, I present evidence on undocumented immigration and immigration enforcement in order to ground the debate in fact and debunk several prominent myths.

  1. Most US immigrants are not here illegally. There are currently 41.3 million foreign-born individuals living in the United States, and less than one-third of those (an estimated 11.3 million) are unauthorized. Furthermore, many unauthorized immigrants do not arrive by crossing the US-Mexico border; instead, as many as 45 percent overstay visas they obtained legally for tourism, education, or temporary work.
     
  2. Most evidence shows that undocumented immigrants are not stealing jobs from or lowering the wages of American workers.
  1. Crime has not increased as a result of increased immigration. Over the same period that unauthorized immigration was increasing, violent and property crime both fell dramatically. There is little data on crime among undocumented immigrants specifically, but among immigrants overall, incarceration rates are lower for foreign-born men than they are for the native-born population. While the number of foreign-born individuals in federal prisons increased from 2005 to 2010, the proportion of the total federal prison population that is foreign-born has remained relatively constant since 2001.
     
  2. Undocumented immigrants pay taxes and Social Security. Undocumented immigrants contribute an estimated $11.6 billion in taxes to federal, state, and local governments. They pay sales taxes and property taxes, even when renting. Furthermore, at least 50 percent of undocumented immigrants file and pay income taxes every year.
     
  3. Deporting all 11 million undocumented immigrants is infeasible. A recent report finds that mass deportation would likely cost between $400 and $600 billion dollars over a 20-year period. In order to accomplish this in the next two years, as some candidates have promised, the United States government would have to add thousands of federal immigration officers, hundreds of thousands of beds in detention centers, hundreds of immigration courts, and thousands of immigration lawyers. Additionally, this deportation policy is estimated to shrink the labor force by 10 million workers and reduce real GDP by $1 trillion.
     
  4. Building a wall on the border will not necessarily halt the influx of undocumented workers. Several candidates have stressed the need for a physical wall on the US-Mexico border to stop undocumented immigration. Previous efforts to cover the entire length of the border have failed because of fiscal and environmental challenges. To build a wall across the entire southern border of the United States, roughly 2,000 miles, would be extremely expensive. Some have even argued that heightened border enforcement decreases the fluid and circular nature of migration and actually discourages immigrants from leaving the United States once they arrive. Additionally, a border wall would not stop immigrants who overstay legally obtained visas and become undocumented.
     
  5. President Obama’s executive orders do not legalize undocumented immigrants. President Obama established the Deferred Action for Childhood Arrivals (DACA) in June 2012. DACA provides temporary relief from deportation and work authorization for young people who meet certain eligibility criteria, including continuous US presence since June 2012. DACA gives undocumented immigrants a temporary, revocable status that must be renewed every two years at the discretion of the Department of Homeland Security. The program does not provide a path toward a legal immigration status or citizenship. The president also announced some expansions to DACA in late 2015, which are currently being considered by the Supreme Court. Additionally, in November 2014, President Obama established the Deferred Action for Parents of Americans and Lawful Permanent Residents, which would provide undocumented immigrants who pass security and criminal background checks, who have been present in the United States since January 2010, and who have children that are US citizens or lawful permanent residents with a three-year work permit and deferred action. This program is also currently before the Supreme Court. 

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In the news: It’s all about the risk pool

March 15, 2016

Urban's Linda Blumberg and John Holahan in Health Affairs:

The health policies of the two political parties and their presidential candidates differentiate themselves clearly along the lines of pooling philosophies: the Democrats generally advocate broad-based pooling of health care risk and the Republicans generally advocate more individual responsibility and are willing to accept much greater segmentation of health care risk. 

Learn more about the risk pool on the Health Affairs site.

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