Saturday, January 26, 2013

Did the Assault Weapons Ban Work? (Part 2)

Did the Assault Weapons Ban Work? (Part 2)

As mentioned in a prior post, David Kopel, a professor at the University of Denver, was on the December 17th edition of The PBS Newshour. Regarding the assault weapons ban, he said the following:

Well, I think we can look at what happened when she had her 10-year in the past. The Congress, when it enacted that ban, also ordered that a formal study be done of the results of it.

The study was performed by the Urban Institute, a very well-respected, somewhat left-leaning think tank in Washington, D.C., and the Urban Institute reported that it had no effect on homicide rates. There was no statistically significant benefit in terms of saving lives.

As I described in the prior post, the Urban Institute study reached no such conclusion. In any event, David Kopel was back on the January 16th edition of The PBS Newshour during which he said the following:

Well, the Department of Justice conducted a study of the effectiveness of that ban, published it in 2004, after it had been in effect for nine years, and concluded it had done absolutely no good. No lives were saved. There weren't fewer shots fired in shoot-outs with police officers or anything else. So it was -- it's a proven failure.

Once again, Kopel is claiming that the official studies concluded that the assault weapon ban did "absolutely no good". In fact, unlike Kopel, the studies were careful not to overstate their findings. Following is an excerpt from the first chapter of the 2004 study, titled "Impacts of the Federal Assault Weapons Ban, 1994-2003: Key Findings and Conclusions":

Should it be renewed, the ban’s effects on gun violence are likely to be small at best and perhaps too small for reliable measurement. AWs [assault weapons] were rarely used in gun crimes even before the ban. LCMs [large capacity magazines] are involved in a more substantial share of gun crimes, but it is not clear how often the outcomes of gun attacks depend on the ability of offenders to fire more than ten shots (the current magazine capacity limit) without reloading.

However, the study continues:

• Nonetheless, reducing criminal use of AWs and especially LCMs could have non-trivial effects on gunshot victimizations. The few available studies suggest that attacks with semiautomatics – including AWs and other semiautomatics equipped with LCMs – result in more shots fired, more persons hit, and more wounds inflicted per victim than do attacks with other firearms. Further, a study of handgun attacks in one city found that 3% of the gunfire incidents resulted in more than 10 shots fired, and those attacks produced almost 5% of the gunshot victims.

This does not sound like Kopel's claim that the study showed that 'no lives were saved" and that "there weren't fewer shots fired in shoot-outs with police officers or anything else". In any case, Kopel's broad claim that the study showed the ban to do "absolutely no good" is obviously false.

Kopel is not the only person to claim that the Assault Weapons Ban was proven to be ineffective without presenting the so-called proof. On January 24th, the same day that Senator Dianne Feinstein held a press conference to announce a new assault-weapons-ban proposal, Vice President Joe Biden held a "Fireside Hangout" to talk about reducing gun violence. The first question came from Philip DeFranco, an American video blogger and YouTube celebrity, who asked the following (about 3:20 into the video):

Mr Vice President, the 1994 Violent Crime Control and Law Enforcement Act, known as the Assault Weapons Ban, expired because it was proven to be ineffective at reducing violent crime...

Biden began his response by correctly pointing out that the Assault Weapons Ban "did not expire because it was proved ineffective, it expired because it had to be reauthorized in ten years" and that the "last administration chose not to seek reauthorization". Biden went on to assert that "there were fewer police being murdered, fewer police being outgunned when the assault weapons ban, in fact, was in existence". If true, this would contradict Kopel's assertion that "there weren't fewer shots fired in shoot-outs with police officers".

Near the end of the chat, Biden made some interesting comments about his concern for the dangers posed by assault weapons versus those posed by high-capacity gun magazines. A Huffington Post article summarized them as follows:

"More people out there get shot with a Glock that has cartridges in a [high-capacity magazines]," said Biden, chair of a White House task force to develop violence prevention proposals, during an online Google+ chat.

"I'm much less concerned, quite frankly, with what you'd call an 'assault weapon' than I am with magazines, and the number of rounds that can be held in a magazine." A Glock is a type of semi-automatic pistol.

I found these comments interesting in that they seemed to agree with some of the statements in the Key Findings and Conclusions chapter of the 2004 study. Following is an excerpt:

• AWs [assault weapons] were used in only a small fraction of gun crimes prior to the ban: about 2% according to most studies and no more than 8%. Most of the AWs used in crime are assault pistols rather than assault rifles.

• LCMs [large capacity magazines] are used in crime much more often than AWs and accounted for 14% to 26% of guns used in crime prior to the ban.

This agrees with Biden's suggestion that LCMs may be the bigger problem, at least in some ways. Following are two additional excerpts involving LCMs:

• However, the decline in AW use was offset throughout at least the late 1990s by steady or rising use of other guns equipped with LCMs in jurisdictions studied (Baltimore, Milwaukee, Louisville, and Anchorage). The failure to reduce LCM use has likely been due to the immense stock of exempted pre-ban magazines, which has been enhanced by recent imports.

...

• Restricting the flow of LCMs into the country from abroad may be necessary to achieve desired effects from the ban, particularly in the near future.

Hence, not only does the 2004 study not claim to prove that the assault weapons ban was ineffective, it makes suggestions as to how to make it more effective. It would seem reasonable to try implementing those suggestions and seeing if the ban can be made more effective. In any event, we should ignore claims of proof by people like Kopel and DeFranco unless and until that proof is presented.

Note: There is a discussion of this post at this link.

Friday, January 11, 2013

Wages, Productivity and Corporate Profits

On November 29th, the Bureau of Economic Analysis released the preliminary estimate of corporate profits for the 3rd quarter of 2012 (a revised estimate was released on December 20th). Following that, a number of publications ran stories reporting that corporate profits had reached a record high while wages had fallen to a record low. For example, CNN Money ran an online story on December 4th. Following is an excerpt:

In the third quarter, corporate earnings were $1.75 trillion, up 18.6% from a year ago, according to last week's gross domestic product report. That took after-tax profits to their greatest percentage of GDP in history.

But the record profits come at the same time that workers' wages have fallen to their lowest-ever share of GDP.

"That's how it works," said Robert Brusca, economist with FAO Research in New York, who said there is a natural tension between profits and the cost of labor. "If one gets bigger, the other gets smaller."

Many of the stories also included a graph which looked like the following:

Wages and Corporate Profits

The actual numbers and sources for this and the following graph can be found at this link. As can be seen, corporate profits are at their highest percentage of GDP since 1947 when this series began. Likewise wages and salary accruals are at their lowest percentage of GDP.

On a related topic, some other stories have pointed out a gap between the growth in productivity and real hourly compensation. For example, an August 10th Washington Post Wonkblog post stated the following:

The other part of Romney’s claim — that wages and employment track productivity — is actually false. Unpublished data from BLS, generously provided to me by the Economic Policy Institute’s Larry Mishel and Nicholas Finio, shows that wages tracked productivity growth until about 1970. After that, wages stagnated even as productivity continued to grow.

In fact the BLS (Bureau of Labor Statistics) has published data that shows this phenomena. This data was used to create the following graph:

Hourly Output and Real Compensation

The red line is labor productivity (output per hour) and the blue line is real hourly compensation, both for nonfarm business. The indices were obtained from the BLS web site as described at the bottom of this page and adjusted so that the base year (with a value of 100) was 1947 instead of 2005. As can be seen, real compensation closely tracked productivity until the early 1970s. Compensation did stagnate somewhat until the late nineties and, after about a decade of increased growth, has stagnated again. Productivity, however, stagnated only briefly in the mid seventies and early eighties and has grown briskly since then. This has caused an increasing gap between compensation and productivity.

This increasing gap is shown by the purple line which is the ratio of productivity to compensation. As can be seen, this ratio was fairly stable from 1950 to 1970, grew slowly until about 1982, and has grown fairly briskly since then.

In addition, this gap is addressed in a January 2011 essay in the Monthly Labor Review titled The compensation-productivity gap: a visual essay. That essay looks at the gap during several periods that contain multiple business cycles. The following table shows the annualized change in productivity, compensation, and their ratio for these periods using the data in the prior graph. It also shows the average annual values wages and corporate profits for these periods using the data in the first graph.

              Annual Average       Annualized Change (percent)
           --------------------  -------------------------------
                                                 Real    Produc-
             Wages &  Corporate      Labor     Hourly   tivity /
              Salary    Profits    Produc-    Compen-    Compen-
    Years*  Accruals  After Tax     tivity     sation     sation
---------  ---------  ---------  ---------  ---------  ---------
1947-1973      51.42       6.18       2.73       2.53       0.20
1973-1979      49.66       6.50       1.26       0.91       0.35
1979-1990      47.74       4.47       1.42       0.55       0.86
1990-2000      46.83       5.64       2.27       1.58       0.68
2000-2012      45.62       8.15       2.18       0.75       1.42
As can be seen, productivity did ease up a bit in the seventies and eighties but remained above 1 percent per year even during these periods. Compensation, however, was below 1 percent per year during the 70's and 80's and since 2000. This has caused the compensation-productivity gap to widen fairly quickly since 1979.

The aforementioned essay goes into more detail on some of the causes of this widening gap. Following is an excerpt from that essay:

There are two components that account for the gap between real hourly compensation growth and productivity growth. The first is the difference between the price indexes used to account for inflation in the BLS productivity and hourly compensation measures. The second is the change in “labor share,” which, as explained earlier, is the share of output that is accounted for by workers’ wages, salaries, and benefits.

Before 2000, the difference between the growth rates of the CPI and the IPD—that is, the difference in inflation rates—explained most of the gap in each period. For 2000 to 2009, an unprecedented decline in labor share accounted for most of the gap.

The underlying causes and significance of these two factors are debatable and require further study. What is clear, however, is that wages have been under pressure since the 1970's and this pressure is not explained by a lack of productivity or corporate profits.

Note: There is a discussion of this post at this link.

About Me

I became interested in U.S. budget and economic matters back in 1992, the first time that I remember the debt becoming a major issue in a presidential election. Along with this blog, I have a website on the subject at http://www.econdataus.com/budget.html. I have blogged further about my motivations for creating this blog and website at this link. Recently, I've been working on replicating studies such as the analysis at this link.

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