Come See the Violence Inherent in the System

United Airlines violently removed a passenger from an airplane earlier this week. The company had overbooked the flight, which is standard practice in the airline industry, and then failed to entice enough people to give up their seats by offering as much as $800 to anyone who would volunteer. The final solution to the conundrum of too many passengers and not enough seats was to demand certain passengers give up their seats. When one man refused, he was forced out.

The video of the event, which showed the man being beaten and bloodied by the police, went viral and attracted nearly universal condemnation. But the condemnation that I’ve seen so far is very unclear about what the problem is. The video is violent and repulsive, but only insofar as all property and contract enforcement is. The forceful removal of the passenger is not an extraordinary aberration from our civilized capitalist order. Rather, it is an example of the everyday violence (and threatened violence) that keeps that capitalist order running.

To see what I mean, let’s consider two of the objections prominent commentators have made to the video to see how they stand up.

1. Offer to pay the man more
This argument, especially prominent among economists on Twitter, says that the airline should have resolved the problem by continuing to increase the amount of money it was offering for volunteers to give up their seat until it had a taker. This, it is argued, would have avoided the disturbing violent outcome.

Although it’s likely true that, at some price level, a passenger would have volunteered to get off the plane, it is not clear why the airline should have to offer any of the passengers any money. The property rights in this case are clear: the plane belongs to United Airlines and the passenger’s ticket does not entitle him to a seat on the airplane in a situation like this where he is commanded to give it up due to overbooking. Thus, he is, according to prevailing thought on this matter, engaged in trespassing.

Do small-l liberal economists really think that, every time someone is trespassing, the owner should have to bribe them to leave? Imagine the incentives that will create. Anyone low on cash could just squat Bill Gates’ house until he paid them enough to go away. Surely this is not what Coase’s theorem imagines.

2. The police involvement was wrong

Over at the libertarian Reason magazine, Brian Doherty somehow avoided an obvious contrarian libertarian take here and decided instead to write that the episode was bad because the police should not have gotten involved.

While there may be something to be said for the ability for private businesses to summon the help of the police to remove people from their premises if they refuse to leave peacefully and their presence is unwanted, there is no excuse for the police to cooperate when the reason their presence is unwanted is not “causing a disturbance” or being violent or threatening to other customers, or stealing goods or services, or doing anything wrong at all, but rather wanting to peacefully use the service they legitimately paid for.

Two things here.

First, Doherty’s ad-hoc theory of when the police should not enforce an owner’s property rights is not actually applicable in this case. Doherty concedes that normally it would be OK for a private business to call in the police muscle to enforce its property rights, but then says that this case is special because the passenger was merely “wanting to peacefully use the service they legitimately paid for.” But the terms of the ticket did not entitle the passenger to refuse to leave when he is asked to because of overbooking. According to the rules of the game, his sit-in protest was not legitimate and he was obligated to leave the airplane and catch the next flight.

Second, whether it was the police who did the removal or private security guards does not really seem to matter here. If it was wrong to violently expel this man, then surely it would have been wrong even if UA staff did it. On the flip side, if it is the case (and it is) that the man had no contractual or property right to remain on that plane after being told to leave, then surely the police are authorized to enforce the property rights of the airlines. That is, after all, how the system works.

The Point
No matter how you cut it, there does not seem to have been anything wrong with what happened here, under the logic of capitalist institutions. It may not have been a good PR move for the airline. They probably could have avoided it all by gratuitously offering more money to get the trespasser to leave. But none of these points turns the thing into a violation of capitalist ethics. It wasn’t.

Instead of soothing ourselves with the idea that this particular application of violence was illegitimate or extraordinary, we should instead confront it head on as a necessary feature of capitalist society. This kind of violence (or threats of it) is operating all the time.

Why does the homeless man sleep in the doorway of an empty office building instead of inside the building itself? Because the police has threatened to attack him just like they attacked this airline passenger. Why does a poor family go to bed hungry when they could just grab food from the supermarket a few blocks away? Because the police has threatened to attack them just like this passenger.

Of course, these threats of capitalist violence are so credible that few dare to act in ways that will trigger them. But the violence is always there lurking in the background. It is the engine that makes our whole system run. It is what maintains severe inequalities, poverty, and the power of the boss over the worker. We build elaborate theories to pretend that is not the case in order to naturalize the man-made economic injustices of our society. But it is the case. Violent state coercion like what you saw in that video is what runs this show.

Poor Disabled Children Pushed Off of SSI Because of Welfare Reform Had Horrible Lives

When people talk about the 1996 welfare reform bill, they tend to focus on the law’s destruction of Aid to Families with Dependent Children (AFDC). And for good reason. According to Danilo Trisi’s analysis of TRIM microdata, extreme poverty among children nearly tripled in the years after the new welfare regime was implemented.

But welfare reform did not just gut AFDC. It also made deep cuts to the Supplemental Security Income (SSI) program for poor disabled people. According to new research, this change had similarly horrific results.

The contemporary discourse around the SSI cuts mirrored that of the discourse around welfare reform more generally. Major publications pleaded with President Clinton to avoid savage SSI cuts, something he could have done because the welfare law gave his administration the power to make the final SSI eligibility rule. But the Clinton administration ignored the pleading and instead issued a rule that it said would throw 135,000 poor disabled children off the SSI rolls.

In addition to making it harder for poor disabled children to receive SSI benefits, the welfare reform bill also made it harder for them to stay on those benefits when they became adults. Prior to welfare reform, when a poor disabled child turned 18, they could continue receiving SSI benefits. After welfare reform, poor disabled children had to be reassessed at age 18 under much stricter SSI eligibility criteria. Needless to say, as a result of this change, many more were dumped off the rolls than before.

The only upside of this particular policy reform was that it accidentally created the conditions for a quasi-random experiment. Poor disabled children who hit age 18 before the welfare law took effect were treated differently than those who hit age 18 after the law took effect. Because the assignment of children into the pre-reform and post-reform groups was arbitrarily based on when they were born, it is possible to cleanly study what effect the reform actually had.

Manasi Deshpande did exactly that in a paper published last year, which was recently written up on the Microeconomic Insights website. As you might expect, the results of the study were not pretty.

According to Deshpande, disabled youth removed from the SSI rolls under this change earned an average of just $4,400 per year on the labor market, an amount that was just one-third of the already-meager benefits they would have received had they stayed on SSI. Many earned nothing. Additionally, these youth did not see their earnings increase as they aged. Rather they consistently hovered in the $4,000 to $6,000 range for the rest of their adulthood.

Deshpande also found that the parents of these disabled kids did not increase their own incomes in response to their kids getting cut off from benefits. So the loss of income was not able to be offset by increased assistance from family. Additionally, the siblings of disabled kids booted off the SSI rolls in this way ended up with substantially lower earnings in their adulthoods as well.

What this research tells us is that welfare reform did not just blow a hole into the US poor relief system that subsequent generations of women and children have fallen into. It also screwed the contemporary generation of poor disabled children for the rest of their lives, condemning them to scrape together scant earnings in order to lead lives of crushing poverty.

Has Underemployment Among College Graduates Gone Up?

Steve Matthews has a piece in Bloomberg arguing that the underemployment rate among young college graduates remains elevated and that this is a sign that the labor market is unhealthy and that labor market slack still remains. I am sympathetic to the idea that the labor market remains unhealthy and that slack still remains, but this particular argument for that conclusion does not seem very compelling.

Here’s Matthews:

The relegation of college graduates to non-degree positions was once seen as a temporary blow for young people unlucky enough to graduate around the time of the deep 2007-2009 recession. Instead, millions of Americans like Reyer continue to face the same struggle.

About 44 percent of recent college grads were employed in jobs not requiring degrees in the final quarter of 2016, not far from the 2013 peak of 46 percent, while the share of that group in low-wage positions has held steady, data from the Federal Reserve Bank of New York showed Wednesday.

That’s a sign that the nation’s labor market isn’t at full health, despite an unemployment rate forecast to remain at 4.7 percent in March, close to the lowest in almost a decade. In fact, the elevated level of college grads in non-college jobs could mean there’s still slack and that the Fed can go slow in raising interest rates, betting that more high-wage jobs will materialize. It could also mark a more permanent shift in employment that the Fed can’t fix and be a tough challenge for President Donald Trump and Congress.

Along with that text, Matthews shares this graph, showing the percent of recent graduates and college graduates overall who are in jobs that do not require a college degree.

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Whenever someone is making an argument about the effect of the Great Recession, I am always curious to see what the data looks like prior to the Great Recession. Starting the trend line in 2007 does not give us a good indication of what normal actually looks like.

Luckily the New York Fed runs this data series back to January 1990 on its website. The graph looks like this:

Screen Shot 2017-04-08 at 10.14.40 AM

The current figure (43.5% in December 2016) is higher than the series low point (37.6% in May 2001), but it is lower than the series high point (47.7% in December 1992). More generally, it seems as if the current figure is within the normal range.

On its face, it is kind of surprising that the figure has not budged much over the last few decades. College attainment has increased significantly over this period and so you might expect that the percentage of graduates who are underemployed would go up.

One reason why this may not have happened in this data series is the way they define what jobs require a college degree and what jobs do not.

The underemployment rate is defined as the share of graduates working in jobs that typically do not require a college degree. A job is classified as a college job if 50 percent or more of the people working in that job indicate that at least a bachelor’s degree is necessary; otherwise, the job is classified as a non-college job.

Because they define a job as requiring a college degree if the majority of people in the job say it does (i.e. it is not based on an objective assessment of the skills required), this means that jobs that used to require a high school degree but now require a college degree are scored as college-degree jobs. Put another way, this particular measure is not able to disentangle the effects of credential inflation. When the credentials for the same job go up, this measure transforms it into a job requiring a college degree and therefore a job that no longer counts as underemployment for a college graduate that fills it.