Quotulatiousness

September 2, 2012

Institutionalizing income inequality

Filed under: Business, Cancon, Government — Tags: , — Nicholas @ 11:07

At the Worthwhile Canadian Initiative blog, Frances Woolley explains how a couple of data points will work to “bake in” income inequality:

If these are the rules used to determine wages, income inequality will prevail.

It’s impossible for all firms to pay their CEOs above the median salary — by definition, half of executives must be paid below the median. If the majority of firms adopt a compensation policy like the Bell Canada Enterprises one quoted above, CEO salaries will increase inexorably.

At the same time, allowing firms to bring in temporary workers at less than the prevailing market wage prevents the price of labour from being bid up in response to labour shortages, dampening salary growth for workers at the lower wage end of the labour market.

Inequality rules.

August 26, 2012

Google investigates their own in-house Gender Gap

Filed under: Business, Economics, Technology, USA — Tags: , , , — Nicholas @ 00:02

Tim Worstall in Forbes on Google’s unique approach to narrowing the Gender Gap:

As we all know, because we’re reminded about it often enough in rather shrill voices, the gender gap is one of the more pernicious unfairnesses in our society. This idea that women only earn 77 cents to a $1 for men, don’t get the same promotions, are in fact discriminated against by society.

The thing is, the more people study this question the less and less it’s possible to see that there is in fact a gender gap. Or rather, a gender gap driven by discrimination. Do note that economists discriminate (sorry) between taste discrimination and rational discrimination. Taste discrimination would be where women were treated worse than men just because they are women. Akin to say the dreadful racism of the past: and we would all admit that there was indeed discrimination against women in the workplace in the past.

What is a great deal less certain is whether this taste discrimination still exists: of course, we’ll always be able to find examples of it, but does it exist in a general sense, across the economy? Many researchers think not: for when you add up the effects of rational discrimination then look at the gender gap there doesn’t seem to be much if any room left for that taste discrimination. Rational discrimination is things like, well, women and men do tend to self-segregate into different occupations. Some of which are higher paid than others. Men tend to be willing to take riskier jobs and thus earn a danger premium to their wages. Women tend to negotiate less hard for their wages or a promotion. And of course women do tend to be those who take career breaks to have and to raise children. Perhaps this shouldn’t be so but it is and it’s most certainly true that the largest contributor to the gender pay gap is not gender itself but the effects of motherhood.

This is all pretty well known in the academic literature. What Google has done is most unfair. It has entirely ignored the academic work, ignored the partisans of both sides, and actually gone and asked its own staff what’s going on.

August 12, 2012

The (long awaited) growth in Indian manufacturing

Filed under: Business, Germany, History, India, Technology — Tags: , , , , , — Nicholas @ 08:59

The Economist on the relatively slow development of India’s manufacturing sector:

If India is to become “the next China” — a manufacturing powerhouse — it is taking its time about it. “We have to industrialise India, and as rapidly as possible,” said the country’s first prime minister, Jawaharlal Nehru, in 1951. Politicians have tried everything since, including Soviet-style planning. But India seems to prefer growing crops and selling services to making things you can drop on your foot.

Manufacturing is still just 15% of output (see chart), far below Asian norms. India needs a big manufacturing base. No major country has grown rich without one and nothing else is likely to absorb the labour of the 250m youngsters set to reach working age in the next 15 years. But it can seem a remote prospect. In July power cuts plunged an area in which over 600m people live into darkness, reminding investors that India’s infrastructure is not wholly reliable. And workers boiled over at a car factory run by Maruti Suzuki. Almost 100 people were injured and the plant was torched. The charred body of a human-resources chief was found in the ashes.

Yet not all is farce and tragedy. Take Pune in west India, a booming industrial hub that has won the steely hearts of Germany’s car firms. Inside a $700m Volkswagen plant on the city’s outskirts, laser-wielding robots test car frames’ dimensions and a giant conveyor belt slips by, with sprung-wood surfaces to protect workers’ knees. It is “probably the cheapest factory we have worldwide”, says John Chacko, VW’s boss in India. In time it could become an export hub. Nearby, in the distance it takes a Polo to get to 60mph, is a plant owned by Mercedes-Benz.

The initial demand for a domestic manufacturing base was more political than economic: it would serve to reinforce the newly won independence of India by showing that India could make its own goods rather than importing from the UK or other major manufacturing nations. It was also economic, in that it would provide relatively high-paying jobs for India’s rapidly urbanizing population.

Ironically, now that the manufacturing sector seems to be on the upswing, the one thing it isn’t going to do for India is provide lots and lots of jobs: as with the rest of the world, manufacturing “things” is being done with fewer workers every year (even when the total output increases, fewer workers are needed to produce that output).

July 17, 2012

FATCA “may end up killing more U.S. jobs than all the call centers in India combined”

Filed under: Economics, Government, Law, USA — Tags: , , , , — Nicholas @ 09:52

Matt Welch on the worst bit of legislation for US workers so far:

That’s a line from this commendable Wall Street Journal column by William McGurn about the oft-lamented-around-these-parts Foreign Account Tax Compliant Act of 2010, or FATCA (rimshot). While President Barack Obama keeps hitting presumptive Republican presidential nominee Mitt Romney over offshoring and jobs, one of Obama’s most economically deleterious laws continues inflicting damage largely off the journalistic radar screen.

“Within the United States,” McGurn writes, “almost no American has heard of it. Save for the occasional article, it’s gone largely uncovered. And just like ObamaCare, the nastiest, job-killing aspects will not hit until after this November’s election.”

McGurn points out that FATCA was the revenue-generating side of the Hiring Incentives to Restore Employment Act of 2010 (HIRE! God, I hate these people….) — “a jobs bill dominated by tax breaks designed to get businesses to hire unemployed Americans.” So once again, government is “paying” for the economically dubious and morally spurious act of granting targeted tax breaks to favored corporations by screwing over the middle class.

July 9, 2012

US recovery from the recession still more theory than reality

Filed under: Economics, USA — Tags: , — Nicholas @ 07:54

Greg Mankiw has a graphical refutation of any claim that the United States has actually seen any recovery from the Great Recession of 2008:

At best, you’d have to call that a “stabilization”, but not a “recovery”.

July 4, 2012

US military pay has more than kept up with civilian payscales

Filed under: Economics, Government, Military — Tags: — Nicholas @ 00:07

Mike Riggs has the details:

In other words, it’s not *just* teachers, cops, firefighters, and the bulk of civil federal employees who are riding high on the hog. Tom Philpott at Military.com reports:

    As private sector salaries flattened over the last decade, military pay climbed steadily, enough so that by 2009 pay and allowances for enlisted members exceeded the pay of 90 percent of private sector workers of similar age and education level.

    That’s one of the more significant findings of the 11th Quadrennial Review of Military Compensation report released last week, given its potential to impact compensation decisions by the Department of Defense and Congress as they struggle to control military personnel costs.

Unlike previous generations, for whom military pay was almost a joke compared to civilian payroll, modern western military pay has been catching up to (or even exceeding) equivalent civilian jobs. When I joined the reserves in the mid-1970’s, the pay was actually quite good: better than minimum wage — the drawback was that the Canadian Forces’ budget was so tight that we were strictly limited to the number of paid training days. While that was a drawback for enlisted troops, it was worse for our senior NCOs and officers: they were working without pay for months at a time.

June 26, 2012

Railway engineering, 1947 style

Filed under: Britain, History, Railways, Technology — Tags: , , — Nicholas @ 00:03

London, Midland & Scottish Railway documentary that shows the relaying of St. Pancras Junction with prefabricated trackwork, along with the associated changes to the signalling system.

What struck me while watching this was the ages of most of the track crew: I’d have expected them to be a bunch of teens-to-early 20’s guys, but there are a lot of old gaffers still doing the heavy lifting here. Oh, and of course the work clothes: caps, hats, jackets, and braces. Not a hard hat or much in the way of obvious safety gear in sight. They may or may not have been better men in those days, but they earned their aches and pains honestly.

H/T to Roger Henry for the link, who pointed out “This will get your pulses racing. Also makes you realize that working on the railroad was for real men. Mechanisation has come a looong way since then.”.

June 5, 2012

That problematic statistic: the gender wage gap

Filed under: Economics, Politics, USA — Tags: , , , , — Nicholas @ 11:57

The Washington Post on President Obama’s claim that women only earn 70 cents to each dollar earned by men (later “corrected” to 77 cents):

We were struck by the disparities in the data when we noticed that a news release by Sen. Barbara Mikulski (D-Md.) trumpeted the 77 cent figure, but it included a link to a state-by-state breakdown that gave a different overall figure: 81 cents.

What’s the difference? The 77 cent figure comes from a Census Bureau report, which is based on annual wages. The BLS numbers draw on data that are based on weekly wages. Annual wages is a broader measure — it can include bonuses, retirement pensions, investment income and the like — but it also means that school teachers, who may not work over the summer, would end up with a lower annual wage.

In other words, since women in general work fewer hours than men in a year, the statistics may be less reliable for examining the key focus of the legislation — wage discrimination. Weekly wages is more of an apples-to-apples comparison, but as mentioned, it does not include as many income categories,

The gap is even smaller when you look at hourly wages — it is 86 cents vs. 100 (see Table 9) — but then not every wage earner is paid on an hourly basis, so that statistic excludes salaried workers. But, under this metric for people with a college degree, there is virtually no pay gap at all.

There are so many different ways of slicing the data that you can “prove” almost any proposition. President Obama also claimed that African American women and Hispanic women’s wages are even worse: “64 cents on the dollar for African American women and 56 cents for Hispanic women.”

Not only did the White House pick the statistic that makes the wage gap look the worst, but then officials further tweaked the numbers to make the situation for African Americans and Hispanics look even more dire.

The BLS, for instance, says the pay gap is relatively small for black and Hispanic women (94 cents and 91 cents, respectively) but the numbers used by the White House compare their wages against the wages of white men. Black and Hispanic men generally earn less than white men, so the White House comparison makes the pay gap even larger, even though the factors for that gap between minority women and white men may have little to do with gender.

May 9, 2012

Stephen Gordon explains that Dutch Disease is merely “economic hypochondria”

Filed under: Cancon, Economics — Tags: , , , — Nicholas @ 09:17

Politicians and newspaper columnists have a fetish about manufacturing. In the Globe and Mail Economy Lab, Stephen Gordon explains why it’s not the crisis we’re constantly being told it is:

The appreciating Canadian dollar has little to do with the decline in manufacturing; employment has been declining worldwide for decades. Changes in relative prices are more important. Producer prices for manufactured goods have increased by about 15 per cent since 2002, while the Bank of Canada’s commodity price index has more than doubled. Any attempt to promote manufacturing exports by depreciating the dollar is doomed to fail, since a lower Canadian dollar will also benefit resource exporters. Capital and labour will always move from sectors where prices are soft to sectors where demand is strong, regardless of what the exchange rate is doing.

But what about those 500,000 lost jobs? An underappreciated fact of the Canadian labour market is the size of the flows in and out of employment. More than 100,000 workers are laid off every month, and even more are hired. Before the recession, the fall in employment manufacturing was largely the result of attrition — workers who quit were not replaced. The loss of 500,000 manufacturing jobs since 2002 has been more than offset by the creation of 2.5 million jobs in other sectors.

[. . .]

Penalizing exports of raw resources could create processing jobs, but those gains will be more than offset by losses elsewhere. If processing in Canada were profitable under world prices, no government intervention would be necessary. The only way policy can generate significantly more processing jobs is by forcing producers of raw materials to accept lower prices or by forcing provincial governments to accept lower royalties. This would be a simple redistribution of income if production is held constant. But it is much more likely that producers would respond to these lower prices by reducing output. Total output and income would fall.

[. . .]

The shift away from manufacturing is part of a process that has increased incomes across Canada. “Dutch disease” is not a problem that needs solving.

May 8, 2012

Now available for download: License to Work

Filed under: Bureaucracy, Economics, Government, Liberty, USA — Tags: , , , , — Nicholas @ 10:14

The Institute for Justice has released a new study, License to Work: A National Study of Burdens from Occupational Licensing, which shows the negative effects imposed on (especially) poor and minority workers across the United States:

The report documents the license requirements for 102 low- and moderate-income occupations — such as barber, massage therapist and preschool teacher — across all 50 states and the District of Columbia. It finds that occupational licensing is not only widespread, but also overly burdensome and frequently irrational.

On average, these licenses force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees. One third of the licenses take more than a year to earn. At least one exam is required for 79 of the occupations.

Barriers like these make it harder for people to find jobs and build new businesses that create jobs, particularly minorities, those of lesser means and those with less education.

May 5, 2012

Rick Santelli goes to the white board

Filed under: Economics, Media, Politics, USA — Tags: , , , — Nicholas @ 08:59

H/T to Kate at Small Dead Animals.

April 29, 2012

QotD: Bankers, Marx’s dream workers

Filed under: Economics, Humour, Quotations — Tags: , , — Nicholas @ 09:54

In a way bankers are Marx’s dream, it’s the workers getting the fruits of their labours. It’s funny that the left is usually angry at shareholders, for taking money out of companies and thereby bringing down workers’ salaries. Yet with the banks they want shareholders to press the banks to do exactly that, and curb pay.

Joris Luyendijk, “External auditor: ‘Nobody at a bank can have a complete overview any more'”, The Guardian, 2012-04-28

April 11, 2012

QotD: The silly claims about “capitalism in crisis”

Filed under: Economics, History, Media, Quotations — Tags: , , , — Nicholas @ 00:08

Yes, times are tougher than they otherwise could be; however, to claim that the bumps in the road over the last few years show that “capitalism is in crisis” is absurd.

[. . .]

Even with the a few recessions, Real per-capita Gross Domestic Product is a lot higher than it was in 1960, 1970, 1980, 1990, or 2000. The truly unique fact about the world as it has changed in the last few centuries is that, as a number of economic historians have emphasized, we live in a world where economic growth is taken to be the norm. […]

Indeed, as the economist Joseph Schumpeter pointed out long ago, capitalism has given us the time and energy to criticize capitalism. People content themselves by being outraged at working conditions in Foxconn plants in China. However, it is the economic growth we have achieved in the western world that allows us the comfortable working conditions from which we express horror at working conditions elsewhere in the world. Further, not all the workers are greeting the reformers as saviors (HT: Doug Stuart). If people are willing to trade off longer working hours for higher incomes, I don’t see how it’s my right to stop them.

[. . .] Donald J. Boudreaux points out how we have to be very careful with income data if we are going to get an accurate picture of trends in standards of living.

If we’re going to talk about “stagnation” we also have to be very clear about precisely what we mean. Consider the near-ubiquity of the iconic gizmo of the early 21st century and its technological cousin: the smart phone and social media. My Forbes.com colleague Erik Kain reported in February that “472 million smartphones were sold worldwide in 2011.” In a world of 7 billion people, the top 1% would be 70 million people. If all the gains really went to them, that would be about six and a half smartphones each for the members of the world’s Top 1%. I’m pretty sure that isn’t what’s happening.

Art Carden, “It’s the Final Crisis of Capitalism, Charlie Brown!”, Forbes, 2012-04-10

April 8, 2012

The Military-Industrial Complex lives

Filed under: Military, Politics, USA — Tags: , , , , — Nicholas @ 10:55

From Strategy Page, where the US Army doesn’t want any more tanks right now, but the politicians (and their crony capitalist “friends”) want the tanks to continue to be built and upgraded:

The U.S. Army is fighting the politicians to avoid having to buy more M-1 tanks, or upgrade some older ones that do not need upgrades. What it comes down to is that the politicians want to keep the only American tank manufacturing plant open. It’s all about political posturing, votes and getting reelected. But the army wants to spend its shrinking budgets on things that will save lives in the next battle. At stake is several billion dollars. The generals cannot openly say that this is about buying votes versus buying lives, but that’s what it comes down to.

So far, over 9,000 American M-1 tanks have been produced and most of them subsequently updated at least once. But the army, seeking to save a billion dollars, wants to close the plant that builds and modifies the M-1. The closure would be for three years, and when it was reopened there would be a backlog of upgrades and parts orders to fill to keep the plant open until, perhaps, an M-1 replacement comes along. At the moment the generals do not have any firm plans for an M-1 replacement.

Politicians and the operators of the plant want to keep the plant open in order to save jobs, votes, and operating profits. This is basically a largely political decision that involves getting the money (from the taxpayers) to stay open by pretending that the army wants this. But the army leadership has not cooperated and has openly opposed this plan. How long the plant will remain in business is uncertain, as is the future of the M-1 tank.

March 8, 2012

Sweatshops and Apple

Filed under: China, Economics, Technology — Tags: , , , , — Nicholas @ 11:15

Sam Bowman points out the economic factors which many western critics miss when they slag Apple for working conditions in the factories where iPhones and iPads are assembled:

Like sweatshop workers in China and elsewhere, Foxconn employees endure long hours, low pay and dangerous working environments, but do so because there is no better alternative. In fact, jobs in sweatshops (and Foxconn factories) tend to be massively in demand, because the alternative is worse. It’s not uncommon for a new employee’s first action being to sign up their relatives to the waiting list for new job openings.

It’s easy to recoil from seen evils, while ignoring unseen alternatives that are even worse. No one in the West will ever have to put up with such bad conditions.

If wages and conditions in Apple’s hometown of Cupertino, CA, were as bad, nobody would work there. That people do so in China is because they have no better alternative. China’s economy is growing quickly, but much of it is still grindingly poor, and difficult to do business in. It’s poverty that makes China’s factories such unpleasant places to work in.

[. . .]

It’s no surprise that China is still very poor compared to neighbouring countries like Japan, South Korea, Taiwan and Singapore. Forty years of brutal socialism under Mao’s Communist state halted China’s development, and decimated institutions crucial for wealth creation, like strong civil society and the rule of law.

The exception, of course, is Hong Kong, where conditions and wages are much better than on mainland China — not because of a bigger government, but because of greater wealth caused by freer markets.

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