Friday, December 9, 2016

Women in the US Labor Market

The role of US women in the (paid) labor force has shifted dramatically in the last half-century or so. For example, the figure shows the labor force participation rate (which includes both those holding jobs and those who are unemployed and looking for work) for men and women since the late 1940s. Circa 1950, almost 90% of men were in the labor force, compared with about one-third of women. But the labor force participation of men has sagged, while the labor force participation of women rose strongly until about 2000, when it flattened out and even started tailing off a bit.


The Russell Sage Foundation Journal has devoted its August 2016 issue to the overall topic "A Half-"Century of Change in the Lives of American Women," The issue contains a short introduction followed by 10 readable essays. Many of the themes are captured in the first essay, "Five Decades of Remarkable but Slowing Change in U.S.Women’s Economic andSocial Status and Political Participation," by Martha J. Bailey and Thomas A. DiPrete. They summarize some of the changes that have happened, and not yet happened (citations omitted):
Women made up less than one-third of all U.S. employees in 1950, but today make up almost half. In the 1960s, they earned around 60 percent of what men did, but this figure has risen today to about 80 percent. Currently, more women than men enroll in and complete college, and changes in women’s roles as mothers and partners have redefined the “typical” American family. ...  Despite these advances, other evidence suggests that women’s progress has slowed or stalled. Pay gaps at the top of the income distribution are large. Women make up less than 10 percent of corporate boards and less than 2 percent of CEOs. The integration of women into the so-called STEM fields has been slow since 1990.  The odds that a woman earns a physical science, engineering, or economics major have hardly changed in the past twenty years. 
It's well-known that the female/male wage gap has been falling over time, and Bailey and DiPrete provide this figure along with some discussion of possible explanations for what has happened and for the remaining gap.

In considering the range of reasons for the remaining gender pay gap. I was struck by the essay by Kim A. Weeden, Youngjoo Cha. and Mauricio Bucca, called "Long Work Hours, Part-Time Work, and Trends in the Gender Gap in Pay, the Motherhood Wage Penalty, and the Fatherhood Wage Premium." Taking up some themes that recur in a number of the other papers, they write (citations and footnotes mostly omitted): 
One of the key empirical insights of this literature is that the gender gap in wages at the aggregate level is perpetuated by persistent gender differences in individual labor market behaviors: whether men and women work for pay, the occupations and industries in which they work, and the number of hours per week they work. These gender differences emerge in the context of structural changes in the distribution of jobs with particular attributes (such as expected work hours) and in the wages associated with these attributes, resulting in complex and offsetting effects on the gender gap in wages. For example, Youngjoo Cha and Kim Weeden (2014) show that the diffusion of long work hours in the United States in the 1990s and 2000s, coupled with the persistent gender gap in long work hours and rising hourly compensation for long work hours, was associated with an increase in the gender gap in wages after adjusting for other wage-relevant attributes. These trends largely offset wage-equalizing shifts in women's educational attainment.
A second empirical insight is that much of what appears to be a gender wage gap is better understood as a gender-specific family gap in pay or, as they are known in the economic and sociological literatures, the motherhood wage penalty and fatherhood wage premium: mothers earn less than observationally similar childless women, and fathers earn more than observationally similar childless men.

Tuesday, December 6, 2016

Economics of Gentrification

"Gentrification" arises when a neighborhood in a city that has in the past offered relatively low-cost housing to relatively low-income people experiences the entry of a wave of higher-income buyers. The new entrants often buy the older housing stock and rebuild or refurbish it, pushing up housing prices in the rest of the neighborhood. On one side, this process offers lower-income people who own their homes a chance for a financial windfall, and can also offer benefits to the neighborhood like improved local job opportunities, shopping options, and public safety. On the other side, gentrification also disrupts existing neighborhoods and can displace low-income residents, some of whom may have been living in the neighborhood for a long time.

Cityscape, which is published three times each year by the U.S. Department of Housing and Urban Development,  has published a 10-paper symposium with various perspectives on gentrification in its most recent issue. Ingrid Gould Ellen and Lei Ding,  the editors of the symposium, offer a short overview essay called "Advancing Our Understandingof Gentrification," which includes some evidence that gentrification did indeed become more common from 2000-2010.

They divide cities into US Census "tracts," which are areas that typically have about 4,000 people, give or take a couple of thousand. They focus on low-income tracts, defined as those tracts where the average income is below the 40th percentile for the city as a whole at the start of the decade.  They then look at what proportion of those tracts have seen large gains in the share of the population that is college-educated, the share of the population that is white, or substantially higher-than-average gain in rents. The figures show the share of low-income tracts that have seen larger-than-average gains the share of college-educated residents, in the share of the population in the tract that is white, and in rents.




Gentrification is part of the ebb and flow of urban life, but all of its effects--for better or worse--seem to have been more powerful in recent years.  Indeed, a writer in the 1980s referred to the gentrification of cities during that time as “Islands of Renewal in Seas of Decay.” Something more powerful and sweeping is happening now.

A number of the causes seem to trace back to a revival of interest of higher-income people in living in central city and downtown neighborhoods. Jackelyn Hwang and Jeffrey Lin describe some of the patterns in in "What Have We Learned About the Causes of Recent Gentrification?":
In sum, since 2000, U.S. cities have seen greater increases in the SES [socioeconomic status] index and other measures in downtown neighborhoods and an expansion of SES index increases to more cities and neighborhoods. Compositional shifts toward White, prime-age, and college-educated households—not population growth—are more characteristic of recent changes. Although lower-skilled or lower-education jobs continue to suburbanize, jobs employing college-educated workers have stopped declining or have even increased in traditional downtowns. Downtown safety and amenity values appear to have increased. A sizable number of downtown neighborhoods in big cities, however, have not seen increases in our SES index at all, and a number of peripheral neighborhoods in smaller metropolitan areas have seen dramatic changes. Despite improving fortunes, the average downtown neighborhood is of lower status compared with its metropolitan area as a whole. Moreover, gentrifying neighborhoods exhibit a strong spatial dependence on historical patterns of income, and, on average, downtown revival has still improved the SES of only those neighborhoods within relatively short distances of U.S. city centers (but more so in big cities). Finally, changes in neighborhoods with middle-SES indexes are similar in big-city downtowns compared with small cities or peripheral areas, but neighborhoods with high-SES indexes in big cities have shown remarkable persistence since 1960.
A number of the papers that follow look at specific dimensions of urbanization in neighborhoods in particular cities, like effects on local jobs, local business, the financial health of long-term residents in gentrifying neighborhoods, and a potential role for subsidized or public housing. Derek Hyra offered a compact summary of consequences of gentrification (citations omitted here):
"Perhaps the most controversial gentrification topic is its residential displacement consequences. There is near empirical consensus, however, that mobility rates among low-income people are equivalent in gentrifying versus more stable low-income neighborhoods. This fact should not be interpreted as evidence gentrification is unrelated to a shrinking supply of affordable housing units (which it often is), but rather that low-income people tend to move at a high rate from all neighborhood types. 
"Although understanding the relationship between gentrification and residential displacement is critical, other important gentrification consequences exist. Gentrification, in some places, is associated with political and cultural displacement. Some gentrifying areas once dominated by low-income minorities demonstrate an association between the movement of upper-income people and a loss of minority political representation. Remember, it was presumed upper-income people moving to low-income neighborhoods would bolster civic society, and it appears, in some circumstances, it has. Often, however, newcomers take over political institutions and advocate for amenities and services that fit their definition of community improvement. This process of political displacement can be linked with cultural displacement, a change in the neighborhood norms, preferences, and service amenities. In certain respects changing norms may be positive in terms of counteracting norms of violence or a lack of health-producing amenities and activities, but do the new norms and incoming amenities in gentrifying neighborhoods sufficiently cater to the preferences of low-income people or do they predominately represent newcomers’ tastes and preferences? 
"Through my gentrification research, I have witnessed how political and cultural displacement breeds intense social tensions, limits meaningful social interactions between longtime residents and newcomers, and results in microlevel segregation. Without ample social interactions across race and class, the promise of mixed-income living environment benefits for the poor seems unlikely. ... [I]t is clear that we must look beyond residential and small business displacement impacts to understand how to effectively facilitate community conditions in economically transitioning neighborhoods to better support social cohesion and interaction among traditionally segregated populations."
I was also interested in the arguments by Lance Freeman that gentrification has not just grown in size, but also changed in form.  As one example, Freeman points out:
"This latest wave of wave of gentrification may also be qualitatively different inasmuch as the 1970s-to-1980s gentrification was much more closely tied to the physical renovation of dilapidated housing. Indeed, news media in the late 1960s and 1970s often described young, White professionals who moved into poor inner-city neighborhoods as “brownstoners,” because this movement almost always involved the renovation of older brownstones. ...  The recent wave of gentrification, however, may be less attached to renovating older dilapidated housing. ... It may be that after nearly a half century of gentrification there are few old distinctive houses in urban areas to be had for a steal. If this latest wave of gentrification has indeed uncoupled housing renovation from upper class movement into the inner city, this change may have implications for our understanding of gentrification. For example, the type of person drawn to renovating and restoring old, distinctive housing may be different from someone who wants to live in a high-rise condominium with concierge service and proximity to his or her office job." 
Freeman also introduced me to a bit of intellectual history and etymology: "The term gentrification was initially coined a half-century ago by the British sociologist Ruth Glass. She wrote, “One by one, many of the working class quarters have been invaded by the middle class—upper and lower.... Once this process of ‘gentrification’ starts in a district it goes on rapidly until all or most of the working class occupiers are displaced and the whole social character of the district is changed” (Glass, 1964: xvii)."


Thursday, December 1, 2016

Youth and the Economic Future of Arab States

"Most recent statistics indicate that two-thirds of the Arab region’s population is below thirty years
of age, half of which falling within the 15 - 29-year age bracket. This age category defines “youth”
according to the report, which estimates the number of young people in the region at over one hundred million. This unprecedented demographic mass of young people at the prime of their working and productive abilities constitutes a huge potential for advancing economic and social development if given the opportunity. ... The report asserts that today’s generation of young people is more educated, active and connected to the outside world, and hence have a greater awareness of their realities and higher aspirations for a better future. However, young people’s awareness of their capabilities and rights collides with a reality that marginalises them and blocks their pathways to express their opinions, actively participate or earn a living. As a result, instead of being a massive potential for building the future, youth can become an overwhelming power for destruction."

This comment comes from a report just published by the  United Nations Development Programme, the Arab Human Development Report 2016, which is subtitled "Youth and the Prospects for
Human Development in a Changing Reality." The report ranges over a wide array of issues, including gender, health, armed conflict, the role of religion, and others. Here, I'll focus on the economic challenge. The most visible problem is a need for job creation to reduce sky-high levels of youth unemployment in the region. But the solutions require confronting what this United Nations report calls the "failure of the Arab development model." Here's the unemployment problem in Arab countries (footnotes omitted for readability):
Unemployment among youth in Arab countries is the highest in the world, 29 percent in 2013, versus 13 percent worldwide. First-time job seekers account for around half the unemployed, also the highest rate in the world. Youth unemployment is hugely costly to the region’s societies and requires a major turnaround in policy thinking about jobs. The region needs to create more than 60 million new jobs in the next decade to absorb the large number of workforce entrants and stabilize youth unemployment. ... 
Job creation, particularly decent and sustainable job creation, is the most challenging issue facing the region. If the workforce continues to grow at current or similar rates, 60 million new jobs will need to be created in the next decade to absorb the large number of workforce entrants. Informality is one of the characteristics of employment in the region, and a large number of youth work in the informal sector where jobs are unstable and offer low wages and poor working conditions. For instance, over 2000–2005, 75 percent of new labour market entrants in Egypt were employed in the informal sector, a startling jump from only 20 percent in the early 1970s. Similarly, during 2001–2007, 69 percent of new jobs in Syria were in the informal sector.18 In 2011, vulnerable employment across the Arab region accounted for almost 30 percent of all jobs. The problem is even serious among low-income youth, who are more likely to settle for informal or unpaid family work.

The report argues that the underlying problem here is a development model which has placed too much reliance on government favoritism and government employment, in a way which has strangled the private sector. But the government isn't going to be able to pay for the 60 million new jobs that are needed. For a UN report, the language describing these issues is unsparing, even harsh. Here's a sample (again, footnotes omitted, along with references to figures):
"Countries in the Arab region share much more than a common language and social and cultural traditions. They have long pursued a model of development that is dominated by the public sector and turns governments into providers of first and last resort. This flawed Arab model of development depends on inefficient forms of intervention and redistribution that, for financing, count heavily on external windfalls, including aid, remittances and rents from oil revenues. The reliance on unearned income is sometimes dubbed the original sin of Arab economies.
"Since independence, most countries have seen little change in economic structure. Manufacturing—the primary vehicle for job creation in emerging economies—has registered painfully slow and sometimes negative growth. The public sector has either crowded out and manipulated the private sector or forged uncompetitive and monopolistic alliances, while inhibiting the development of viable systems of public finance. With few exceptions, the private sector is weak and dependent on state patronage, and the business environment hampers the rise of young and independent entrepreneurs. Because of their limited size and scope, the investments of the private sector have not been able to pick up the slack created by the more recent rollback in state employment. The sustainability of this system has been increasingly eroded by the rising costs of repression and redistribution.
"The state-led development model has created contradictions. It has expanded access to key entitlements, whether public employment or food subsidies, thereby raising some levels of human development. Thus, partly because of the entitlements, societies have been able to lower the incidence of poverty and income inequality, shielding disadvantaged groups from some of the worst economic pressures of our times. However, these ostensibly favourable outcomes have entailed a deeper trade-off in the long run. ...
"While the model has created an adverse legacy of entitlement that aims to sustain some individuals from conception to coffin, it has also fostered political marginalization, economic deprivation and social exclusion. Thus, the associated trade frictions push firms without political or social connections to the margins of the economy, and opportunities for absorbing young entrants to the workforce are lost. The model thereby hobbles promising enterprises, discourages economic efficiency and deters young talents because its goal is not to promote innovation or competition, but solely to preserve access to wealth and power among a few. The result is a top-down model that is based on hand-outs, undermines individual agency and encourages short-term consumption at the expense of long-term investment in human capabilities and competitive production.
The contribution of private investment to growth in the region is among the lowest in the world. This is especially the case because entrepreneurs consistently face anticompetitive and discretionary practices that favour incumbent or large firms at the expense of new entrants, small businesses and young entrepreneurs. These practices go beyond opportunistic corruption; they reflect a deep structural alliance between political and economic elites to secure economic interests. ... Resource rents in the region have been channelled into lavish and conspicuous real estate projects,  unproductive public sector spending and military expenditures, but the spending benefits a tiny slice of society." 
Conflict across the Middle East has many causes. But the combination of an interconnected world in which young people can see and hear how others around the world are living, combined with a system of political and economic governance that makes it extremely difficult for many of them to attain even a modestly secure middle-class economic future, is a recipe for social turmoil.

Monday, November 28, 2016

Improvements in US Air Pollution

The US government passed its first Air Pollution Control Act in 1955, but the major amendments to that law passed in 1970--including the creation of the Environmental Protection Agency to administer the law--greatly expanded the federal and state enforcement efforts. The EPA has published a web report called "Our Nation's Air: Status and Trends through 2015."

It's been common since 1970 to refer to the six "criteria" air pollutants, which include carbon monoxide, lead, nitrogen oxides, ozone, particulates, and sulfur dioxide. The lines on the graph, from top to bottom, show the rise since 1970 in US GDP, vehicle-miles traveled, population, energy consumption, and carbon emissions--and the fall in the overall emissions of the six criteria pollutants since 1970.


Here's more detail since 1990. On this figure, the vertical axis shows the level of various measures of the criteria air pollutants relative to the National Ambient Air Quality Standards (NAAQS). These air pollutants are below the national standard, and falling since 1990s.



As the report notes:
Nationally, concentrations of the criteria air pollutants have dropped significantly since 1990:
Carbon Monoxide (CO) 8-Hour, 77%
Lead (Pb) 3-Month Average, 99%
Nitrogen Dioxide (NO2) Annual, 54%
Nitrogen Dioxide (NO2) 1-Hour, 47%
Ozone (O3) 8-Hour, 22%
Particulate Matter 10 microns (PM10) 24-Hour, 39%
Particulate Matter 2.5 microns (PM2.5) Annual, 37%
Particulate Matter 2.5 microns (PM2.5) 24-Hour, 37%
Sulfur Dioxide (SO2) 1-Hour, 81%
In my experience, this kind of news tends to produce extreme and opposing reactions, either self-congratulatory or self-flagellatory. The self-congratulatory view points to the progress. The self-flagellatory view had no trouble pointing out shortcomings. The reduction in air pollutant emissions might have happened sooner, or at lower cost. There are hot spots of air pollution across the country where air pollution is often above these levels. The criteria pollutants don't include carbon emissions.
The self-congratulatory sometimes point to this progress as an argument that efforts toward cleaner air can be relaxed; the self-flagellatory argue that past progress is a reason to accelerate such efforts. 

At least for today, I'd like to step out of that dichotomy and just emphasize that economic growth in high-income countries can, at least in these important cases, happen together with outright reductions in air pollution. Given that air pollution is the world's biggest health hazard, according to the World Health Organization, this is potentially very good news.

Friday, November 25, 2016

The Plague of Long-Term Unemployment in Europe

There's plenty of legitimate reason for concern about the extent to which the US labor market is producing high quality jobs. But every now and again, Americans might want to glance to the east and contemplate Europe's unemployment issues.

Here's the unemployment rate in Europe (from Eurostat), with the red line showing the unemployment rate in the 19 countries of euro-zone, and the blue line showing the unemployment rate across all 28 countries of the EU. In the euro-zone, the average unemployment rate has been above 9% since 2000, with the exception of a dip just before the Great Recession hit, and it's been in the range of 10% or higher for almost all of the last seven years.


But in at least two ways, Europe's problem is worse than this figure suggests. One is that the averages don't take into account the stress in countries with higher-than-average unemployment: for example, unemployment in France in September 2016 was 10.2%; in Italy, 11.7%; in Spain, 19.3%; and in Greece, 23.2%.

Another dimension is that Europe's overall unemployment rate doesn't show what share of that unemployment is long-term, rather than short-term and transition. A new VoxEU.org e-book, Long-Term Unemployment After the Great Recession: Causes and Remedies, edited by Samuel Bentolila and Marcel Jansen, offers a series of short and readable essays with some overall perspectives and close-up looks at long-term unemployment in eight countries: Denmark, France, Germany, Italy, Netherlands, Poland, Spain, and the UK.

In the "Introduction" by Bentolila and Jansen, they point out that if you counted as unemployed only those who have been out of work and looking for a job for more than a year, the unemployment rate across the 28 countries would still have been nearly 5% in 2015. Moreover, in many countries the long-term unemployed are 40%, 50%, and more of the total unemployed. Here's a figure:

As the figure shows, the long-term unemployed (more than a year) in the US economy is less than 20% of its the total number of our much lower unemployment rate.

American readers: can you imagine the social turmoil in the US if the unemployment rate has been above 10% for the last seven years, instead of peaking at 10% back in October 2009 and falling down to about 5% by a year ago in fall 2015? Can you imagine if half of these unemployed had been looking for work for more than a year? Consider the difference, and you'll have a better sense of why the EU is struggling to have much appeal to the European public.

Thursday, November 24, 2016

An Economist Chews Over Thanksgiving

As Thanksgiving preparations arrive, I naturally find my thoughts veering to the evolution of demand for turkey, technological change in turkey production, market concentration in the turkey industry, and price indexes for a classic Thanksgiving dinner. Not that there's anything wrong with that. [Note: This is an updated and amended version of a post that was first published on Thanksgiving Day 2011.]

The last time the U.S. Department of Agriculture did a detailed "Overview of the U.S. Turkey Industry" appears to be back in 2007, although an update was published in April 2014 . Some themes about the turkey market waddle out from those reports on both the demand and supply sides.

On the demand side, the quantity of turkey per person consumed rose dramatically from the mid-1970s up to about 1990, but since then has declined somewhat. The figure below is from the Eatturkey.com website run by the National Turkey Federation. Apparently, the Classic Thanksgiving Dinner is becoming slightly less widespread.




On the production side, the National Turkey Federation explains: "Turkey companies are vertically integrated, meaning they control or contract for all phases of production and processing - from breeding through delivery to retail." However, production of turkeys has shifted substantially, away from a model in which turkeys were hatched and raised all in one place, and toward a model in which the steps of turkey production have become separated and specialized--with some of these steps happening at much larger scale. The result has been an efficiency gain in the production of turkeys. Here is some commentary from the 2007 USDA report, with references to charts omitted for readability:

"In 1975, there were 180 turkey hatcheries in the United States compared with 55 operations in 2007, or 31 percent of the 1975 hatcheries. Incubator capacity in 1975 was 41.9 million eggs, compared with 38.7 million eggs in 2007. Hatchery intensity increased from an average 33 thousand egg capacity per hatchery in 1975 to 704 thousand egg capacity per hatchery in 2007.
Some decades ago, turkeys were historically hatched and raised on the same operation and either slaughtered on or close to where they were raised. Historically, operations owned the parent stock of the turkeys they raised while supplying their own eggs. The increase in technology and mastery of turkey breeding has led to highly specialized operations. Each production process of the turkey industry is now mainly represented by various specialized operations.
Eggs are produced at laying facilities, some of which have had the same genetic turkey breed for more than a century. Eggs are immediately shipped to hatcheries and set in incubators. Once the poults are hatched, they are then typically shipped to a brooder barn. As poults mature, they are moved to growout facilities until they reach slaughter weight. Some operations use the same building for the entire growout process of turkeys. Once the turkeys reach slaughter weight, they are shipped to slaughter facilities and processed for meat products or sold as whole birds.
Turkeys have been carefully bred to become the efficient meat producers they are today. In 1986, a turkey weighed an average of 20.0 pounds. This average has increased to 28.2 pounds per bird in 2006. The increase in bird weight reflects an efficiency gain for growers of about 41 percent."
The 2014 report points out that the capacity of eggs per hatchery has continued to rise (again, references to charts omitted):
"For several decades, the number of turkey hatcheries has declined steadily. During the last six years, however, this decrease began to slow down. As of 2013, there are 54 turkey hatcheries in the United States, down from 58 in 2008, but up from the historical low of 49 reached in 2012. The total capacity of these facilities remained steady during this period at approximately 39.4 million eggs. The average capacity per hatchery reached a record high in 2012. During 2013, average capacity per hatchery was 730 thousand (data records are available from 1965 to present)."
U.S. agriculture is full of examples of remarkable increases in yields over perionds of a few decades, but they always drop my jaw. I tend to think of a "turkey" as a product that doesn't have a lot of opportunity for technological development, but clearly I'm wrong. Here's a graph showing the rise in size of turkeys over time from the 2007 report.




The production of turkey remains an industry that is not very concentrated, with three relatively large producers and then more than a dozen mid-sized producers. Here's a list of top turkey producers in 2014 from the National Turkey Federation:



In the last couple of years, the US turkey industry has at times been affected by an outbreak of HPAI
(Highly Pathogenic Avian Influenza). In the November 17, 2015 issue of the "Livestock, Dairy, and Poultry Outlook" from the US Department of Agriculture, Kenneth Mathews and Mildred Haley offer some details.
U.S. turkey meat production in third-quarter 2015 was 1.35 billion pounds, down 9 percent from a year earlier. This continued the downward path for turkey production in 2015 ... The third-quarter decline was due to both a lower number of turkeys slaughtered and a drop in their average live weight at slaughter. The slaughter number fell to 57.5 million, 6 percent lower than a year earlier, while the average live weight at slaughter declined to 29.3 pounds, a drop of 3 percent from the previous year. Since April the average live weight at slaughter has been lower than the previous year, for a period of 6 consecutive months—reflecting the impact of the HPAI outbreak, which caused processors to slaughter birds somewhat earlier than they normally would in order to maintain supply levels. ... Lower turkey meat production during third-quarter 2015 helped to lower overall turkey stocks, which, in turn, put upward pressure on whole bird prices. ... Turkey meat production in 2016 is forecast at 6 billion pounds, which would be an increase of 8 percent from the HPAI-reduced production of the previous year; much of the increase will come in the second half of the year. ... Prices for whole frozen hen turkeys at the wholesale level averaged $1.36 per pound in October, up from $1.16 per pound the previous year (17 percent). ... The quarterly price for frozen whole hens in 2016 is forecast higher through the first half of the year, but then to average below year-earlier levels in the second half, as higher production mitigates traditional seasonal price increases.
For some reason, this entire post is reminding me of the old line that if you want to have free-flowing and cordial conversation at dinner party, never seat two economists beside each other. Did I mention that I make an excellent chestnut stuffing?

Anyway, the starting point for measuring inflation is to define a relevant "basket" or group of goods, and then to track how the price of this basket of goods changes over time. When the Bureau of Labor Statistics measures the Consumer Price Index, the basket of goods is defined as what a typical U.S. household buys. But one can also define a more specific basket of goods if desired, and since 1986, the American Farm Bureau Federation has been using more than 100 shoppers in states across the country to estimate the cost of purchasing a Thanksgiving dinner. The basket of goods for their Classic Thanksgiving Dinner Price Index looks like this:



The cost of buying the Classic Thanksgiving Dinner actually declined by a bit in 2016, compared with 2015. The top line of the graph that follows shows the nominal price of purchasing the basket of goods for the Classic Thanksgiving Dinner. The lower line on the graph shows the price of the Classic Thanksgiving Dinner adjusted for the overall inflation rate in the economy. The line is relatively flat, which means that inflation in the Classic Thanksgiving Dinner has actually been a pretty good measure of the overall inflation rate.

Thanksgiving is a distinctively American holiday, and it's my favorite. Good food, good company, no presents--and all these good topics for conversation. What's not to like?

Origins of the Thankgiving Holiday: George Washington, Sarah J. Hale, Abraham Lincoln

Thanksgiving is a day for a traditional menu, and I take a holiday by reprinting this annual column on the origins of the day:

The first presidential proclamation of Thanksgiving as a national holiday was issued by George Washington on October 3, 1789. But it was a one-time event. Individual states (especially those in New England) continued to issue Thanksgiving proclamations on various days in the decades to come. But it wasn't until 1863 when a magazine editor named Sarah Josepha Hale, after 15 years of letter-writing, prompted Abraham Lincoln in 1863 to designate the last Thursday in November as a national holiday--a pattern which then continued into the future.

An original and thus hard-to-read version of George Washington's Thanksgiving proclamation can be viewed through the Library of Congress website. The economist in me was intrigued to notice that some of the causes for giving of thanks included "the means we have of acquiring and diffusing useful knowledge ... the encrease of science among them and us—and generally to grant unto all Mankind such a degree of temporal prosperity as he alone knows to be best."

Also, the original Thankgiving proclamation was not without some controversy and dissent in the House of Representatives, as an example of unwanted and inappropriate federal government interventionism. As reported by the Papers of George Washington website at the University of Virginia.
The House was not unanimous in its determination to give thanks. Aedanus Burke of South Carolina objected that he “did not like this mimicking of European customs, where they made a mere mockery of thanksgivings.” Thomas Tudor Tucker “thought the House had no business to interfere in a matter which did not concern them. Why should the President direct the people to do what, perhaps, they have no mind to do? They may not be inclined to return thanks for a Constitution until they have experienced that it promotes their safety and happiness. We do not yet know but they may have reason to be dissatisfied with the effects it has already produced; but whether this be so or not, it is a business with which Congress have nothing to do; it is a religious matter, and, as such, is proscribed to us. If a day of thanksgiving must take place, let it be done by the authority of the several States.”

Here's the transcript of George Washington's Thanksgiving proclamation from the National Archives.
Thanksgiving Proclamation
By the President of the United States of America. a Proclamation.
Whereas it is the duty of all Nations to acknowledge the providence of Almighty God, to obey his will, to be grateful for his benefits, and humbly to implore his protection and favor—and whereas both Houses of Congress have by their joint Committee requested me “to recommend to the People of the United States a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many signal favors of Almighty God especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness.”
Now therefore I do recommend and assign Thursday the 26th day of November next to be devoted by the People of these States to the service of that great and glorious Being, who is the beneficent Author of all the good that was, that is, or that will be—That we may then all unite in rendering unto him our sincere and humble thanks—for his kind care and protection of the People of this Country previous to their becoming a Nation—for the signal and manifold mercies, and the favorable interpositions of his Providence which we experienced in the course and conclusion of the late war—for the great degree of tranquillity, union, and plenty, which we have since enjoyed—for the peaceable and rational manner, in which we have been enabled to establish constitutions of government for our safety and happiness, and particularly the national One now lately instituted—for the civil and religious liberty with which we are blessed; and the means we have of acquiring and diffusing useful knowledge; and in general for all the great and various favors which he hath been pleased to confer upon us.
and also that we may then unite in most humbly offering our prayers and supplications to the great Lord and Ruler of Nations and beseech him to pardon our national and other transgressions—to enable us all, whether in public or private stations, to perform our several and relative duties properly and punctually—to render our national government a blessing to all the people, by constantly being a Government of wise, just, and constitutional laws, discreetly and faithfully executed and obeyed—to protect and guide all Sovereigns and Nations (especially such as have shewn kindness unto us) and to bless them with good government, peace, and concord—To promote the knowledge and practice of true religion and virtue, and the encrease of science among them and us—and generally to grant unto all Mankind such a degree of temporal prosperity as he alone knows to be best.
Given under my hand at the City of New-York the third day of October in the year of our Lord 1789.
Go: Washington
Sarah Josepha Hale was editor of a magazine first called Ladies' Magazine and later called Ladies' Book from 1828 to 1877. It was among the most widely-known and influential magazines for women of its time. Hale wrote to Abraham Lincoln on September 28, 1863, suggesting that he set a national date for a Thankgiving holiday. From the Library of Congress, here's a PDF file of the Hale's actual letter to Lincoln, along with a typed transcript for 21st-century eyes. Here are a few sentences from Hale's letter to Lincoln:
"You may have observed that, for some years past, there has been an increasing interest felt in our land to have the Thanksgiving held on the same day, in all the States; it now needs National recognition and authoritive fixation, only, to become permanently, an American custom and institution. ... For the last fifteen years I have set forth this idea in the "Lady's Book", and placed the papers before the Governors of all the States and Territories -- also I have sent these to our Ministers abroad, and our Missionaries to the heathen -- and commanders in the Navy. From the recipients I have received, uniformly the most kind approval. ... But I find there are obstacles not possible to be overcome without legislative aid -- that each State should, by statute, make it obligatory on the Governor to appoint the last Thursday of November, annually, as Thanksgiving Day; -- or, as this way would require years to be realized, it has ocurred to me that a proclamation from the President of the United States would be the best, surest and most fitting method of National appointment. I have written to my friend, Hon. Wm. H. Seward, and requested him to confer with President Lincoln on this subject ..."
William Seward was Lincoln's Secretary of State. In a remarkable example of rapid government decision-making, Lincoln responded to Hale's September 28 letter by issuing a proclamation on October 3. It seems likely that Seward actually wrote the proclamation, and then Lincoln signed off. Here's the text of Lincoln's Thanksgiving proclamation, which characteristically mixed themes of thankfulness, mercy, and penitence:

Washington, D.C.
October 3, 1863
By the President of the United States of America.
A Proclamation.
The year that is drawing towards its close, has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, others have been added, which are of so extraordinary a nature, that they cannot fail to penetrate and soften even the heart which is habitually insensible to the ever watchful providence of Almighty God. In the midst of a civil war of unequaled magnitude and severity, which has sometimes seemed to foreign States to invite and to provoke their aggression, peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere except in the theatre of military conflict; while that theatre has been greatly contracted by the advancing armies and navies of the Union. Needful diversions of wealth and of strength from the fields of peaceful industry to the national defence, have not arrested the plough, the shuttle or the ship; the axe has enlarged the borders of our settlements, and the mines, as well of iron and coal as of the precious metals, have yielded even more abundantly than heretofore. Population has steadily increased, notwithstanding the waste that has been made in the camp, the siege and the battle-field; and the country, rejoicing in the consiousness of augmented strength and vigor, is permitted to expect continuance of years with large increase of freedom. No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy. It has seemed to me fit and proper that they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People. I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving and Praise to our beneficent Father who dwelleth in the Heavens. And I recommend to them that while offering up the ascriptions justly due to Him for such singular deliverances and blessings, they do also, with humble penitence for our national perverseness and disobedience, commend to His tender care all those who have become widows, orphans, mourners or sufferers in the lamentable civil strife in which we are unavoidably engaged, and fervently implore the interposition of the Almighty Hand to heal the wounds of the nation and to restore it as soon as may be consistent with the Divine purposes to the full enjoyment of peace, harmony, tranquillity and Union.
In testimony whereof, I have hereunto set my hand and caused the Seal of the United States to be affixed.
Done at the City of Washington, this Third day of October, in the year of our Lord one thousand eight hundred and sixty-three, and of the Independence of the United States the Eighty-eighth.
By the President: Abraham Lincoln
William H. Seward,
Secretary of State