"The Great Doubling:" New Global Labor Market v2

A huge increase workers is having a disastrous effect on US wages and jobs for low-skilled workers.

The University of Wisconsin-Madison's Institute for Research on Poverty had an interesting article about globalization's effect on US low wage workers. The article was written by Ricard B. Freeman. Freeman discusses' the global increase of workers from China, India and Russia. The number of workers available to global markets has increase from approximately 1.5 Billion to about 3 Billion. However, the capital available for production has stayed about the same. So the ratio of capital to labor per unit of output has fallen by 50%. This gives capital a tremendous advantage in the new global environment. Production can take place almost anywhere labor is cheap.

The entry of China and India into the global market place has also had a devastating impact on other low and medium wage countries. Countries that used to export to the US and EU are being replaced by China.

The author also defends Paul Samuelson's view that globalization may not always be good especially for low skilled workers. Mr. Samuelson had been attacked by some economists for "opposing" free trade. The author points out that China and India, besides just exporting low wage products, are also producing highly educated workforces to challenge high skilled products from the US and Europe. These new competitors are adding supply and competition, and reducing prices, profits and wages.

Mr. Freedman then highlight two scenarios the US could take given the effects of globalization.

One: China and India produce products at lower prices which increases global standards of living. The US retains some of it technological lead to continue to produce high valued products and services. A high world savings rate leads to an increase in the capital / labor ratio. The US puts some money into a stronger social safety net including healthcare to support high living standards for workers who's wages are limited by low-wage competition.

A second scenario is capital formation fails to match labor growth. The Chinese and Indian economies only benefit "elites" leading to instability. The US develops a backlash against globalization and limits free trade.

Professor Freeman proposes some solutions.
1) Continued investments in science, technology and education.
2) Continued immigration of scientists and engineers.
3) Government support for low wage workers such as:
Earned Income Tax Credit
Higher wages and higher minimum wage
Support for unions and collective bargining
Profit sharing with employees
4) Support for government programs such as healthcare which reduce the cost to hire new employees

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A huge increase workers is having a disastrous effect on US wages and jobs for low-skilled workers.

You can read the report here.

Where we work: Employment by Race and Gender and Gender and Race for 2008

Every wonder where different people work ?? Or what would make a good career for the long term ?? (yeah, I know, health care!!) But it is interesting to look at the distribution of employment by race and gender.

With these charts we will start to look in detail at employment by industry for different genders and races. The next set of charts will add more employment categories. And then a close look at employment in detail in certain SIC codes. Finally, we want to look at the trends over time.


We will then speculate about why certain trends exist. Lastly, we will look the employment projections and determine what would be a good field for long-term employment.

We will probably not look at education, since educational effects are pretty cut and dried. College educated workers have an unemployment rate one fourth that of high school drop out. Educational will be covered separately.

v1

Looking for a Story: Ask "Why?" or "Was it Fair ??"

Writing a blog is a pain in the neck. You are always looking for a story.

I noticed this morning, while I was looking for something to write about, that comparing racial groups and disparities was a nice quick story. In this case I was looking at some of data about employment by industry. Certain groups are more prevalent in certain industries. You can look at Whites in farming, Black barbers or Asian computer professionals.

The results always makes a good story. It makes a raw comparison of different groups in an "objective" manner and points out the winners and losers. Boy, what fun. My group is better than yours. Ha, Ha. Or as my kids say "Nanny-Nanny Poo Poo."

But there are much more complex and inciteful questions to ask such as "Why is that ?" and "It is fair?" Was the competition fair ?? Was it organized in a clear and transparent manner ? Does the competition benefit the larger society ?? Did the benefits accrue to all members of society ??

Tax policy from Brookings and Urban Institute

When, I have time, I have been reading up on tax policy (usually right before bed time). But there are two good sites I like:

TaxVox

Center on Budget and Policy Priorities

If you really want to understand where we spend our money and the close connection between the federal and state governments, these two sites have the details.

Happiness Poll by Gallup

The Gallup Organization, one of america's largest polling organization, has created a site on happiness and well being. The website is here.

The site aims to measure, in detail, different aspect of well-being and happiness in the United States.

US Tries to Steer Textile Purchases to Haiti

Ron Kirk, US trade representative, announced a program to benefit apparel manufacturing in Haiti. The program called "Plus 1 for Haiti" will encourage US Brands and retailers to source one percent of their total apparel purchases from Haiti.



Click here for the press release.

"Lack of Black Doctors Traced to Pre-College Factors

Blacks make up only 8 percent of first year medical students while they are 15% of the total US population. The study found that poor quality education, lower school spending, higher poverty rates and lack of parental educational achievement are the primary factors for poor Black achievement in the health care field.

When the negative factors were controlled for Black were actually more likely to graduate from college. The authors speculate that some "leakage" of students in law and business (MBA) may be reducing the numbers.


You can read the press release here.

Total Black Employment 1972 to 2009

Total Black employment has grown steadily over the past 40 years.



Since 1972, Blacks have increased their employment by 7.2 million.

Black Employment Drops 1.4 Million During Recession

During the current recession Black employment has dropped by 1.398 million persons from the beginning of the recession in Dec 2007 to Jan 2010.





The second graph shows the longer term trend. After a run up in employment during the 00's (aught's), Black employment has dropped drastically since December 2007.

The New Global Labor Market

A huge increase workers is having a disastrous effect on US wages and job for low-skilled workers.

You can read the report here.

Unemployment by Class (Income)

There is some really good work being done at the Northeastern University's Center for Labor Market Studies (CLMS) on the severe inequality in the unemployment situation by income.

The authors divide the the labor market into 10 different income sections then determine impact of the recession on each group. They find that the unemployment and under employment rate for the bottom 10 percent of income earners (less than $12,160) is greater than 50%. While the very top income bracket (greater than $138,700) had an under utilization rate of about 6%. In other words, unemployment issues are falling almost completely on lower income people.

Here is the study.

Black U-6 Near 25%!!!

Using the broadest measure of unemployment, U-6, and a basic logical computation, nearly a quarter of Blacks in the US want to work and cannot get it. The BLS U-6 measure includes the all unemployed workers, workers who work part time and want full time work, and discouraged workers who would work if offered.

The BLS releases only a U-6 measure for the general population. It does not release a U-6 measure for specific demographic groups. However, computing U-6 for Blacks is straight forward. Historically, the employment situation for Blacks has always been worse then that of the general population. Theirfore, U-6 would also be worse for Blacks than for the general population, if released. So, if we add the difference between the general U-3 and U-6 to the Black unemployment rate, we would logical get a figure that is the minimum U-6 for Blacks. The real Black figure should be higher. Sadly.

Non Farm Payroll drops only 20,000 Jobs

The BLS revised it's non farm payroll number for November to reflect a 64,000 job increase and disclosed it's January 2010 number was only a drop -20,000. However, the cumulative job loses since the recession began still tops 7 million.

Black Unemployment Hits Record 16.5%

The Black Unemployment rate increased by 0.3% to 16.5% of the total Black labor force. Approximately 2.9 Million Blacks are unemployed, an increase of 86,000 over the prior month. Eighty nine thousand additional Black men became unemployed while 27,000 Black women lost jobs. During the same period all other demographic groups had small decreases.

In the general labor market, the overall unemployment rate may have peaked. The general unemployment rate decreased from 10.0% to 9.7%. The total number of unemployed person dropped by 430,000 to approximately 14.8 million.

Executive Branch Budget Proposal Released

The Office of Management and Budget of the Executive Branch reveled the Whitehouse's proposed budget. The budget will be sent to Congress for revision but serves and the template for Democratic's spending proposals. The budget proposes a 3 year freeze on domestic program and then limiting domestic program growth to the rate of inflation. There would be essentially no increases in spending on domestic programs other than medicare and health. National defense continues to be the biggest spending item. National Defense will grow from $694 Billion in 2009 to $866 Billion in 2020 which is a 25% increase.

The following charts show the major budget items and their growth rates. Basically, the only major areas growing are healthcare, social security and defense.



Here is a graph of all budget categories showing essentially zero growth in the remaining domestic programs.





One of the most striking figures in the budget is continued growth of age related costs including healthcare in the budget. These include Social security, health care and Medicare. These are also the largest expenditure items in the budget. Sadly, the budget includes small long-term decreases in education, community development, natural resources and the environment. Foreign relations, agriculture and income security have zero growth over the budget period.



This graph shows the compound average growth rate (CAGR) over the 2009-2020 budget period of the different budget categories. The growth rates for commerce are affected by the TARP bailout. The growth rate for the energy department is affected by the Stimulus program(ARRA).

Summary

1. The budget will have very little direct stimulative effect for job growth outside of defense and healthcare.

2. We are spending well beyond our long-term means in national defense.

Glossary.

Budget Authroity -- The proposed amount to be spent in a year

Budget Outlay -- The amount planned for actual spending. Some programs have multiyear spending, so outlays are the actual money going out the door.

Phoney debt scams: You can't get much lower than 0% interest

I will never cease to be amazed at the people of the United States. And their lack of economic understanding. The calls to reduce the deficit are being led by some of same people who were big spenders under the Bush administration. I am starting to believe, quite sadly, that this country gets the representation it deserves. "No one ever got conned, who didn't want to be conned."

How can the group that spent $1 Trillion on two wars and $2.5 Billion on tax cuts have any sort of legitimate complaint about the budget deficit. To me, it is just an old recycled excuse to block any sort of spending, that they disagree with, by the national government. When they are in power, they can spend. When the opposition is in power, we must watch deficits.

I am also, amazed at the lack of understanding of basic economic principals such as: deficit increase during recessions(declining tax revenue and fixed commitment spending) or cutting spending during a recession will prolong the downturn.

Another, more basic economic principle called "crowding out" is rarely discussed. It is the level of national debt at which the US government starts to compete with private investors for loans(debt) thus raising interest rates. No one knows what level of National Debt (as measured by Debt-to-GDP) will start to affect interest rates. Many economists believe it is around the 90% - 100% ratio when there is some pressure on interest. But interest rates, which are near 0%, also affected by private demand which is lessened during a recession. In other words, the US national debt does not seem to be affecting interest rates. You can't get much lower than 0%.

Luckily Obama's pollsters have gotten out in front of this one. Obama has proposed some modest deficit reduction plans.

Real help for Haiti: Impose Martial Law Now.

Haiti needs martial law now. Run by foreigners. It needs stability and to root put corruption. Yes, there are certain situations were other forms of government are better than democracy. We have martial laws in the US for just such situations. Haiti needs similar laws imposed now. The Haitian government, which was barely functioning prior to the earthquake, need to be totally reorganized. Democracy, is expensive, divisive and subject to corruption. You might be able to keep some sort of local representatives, but, nationally, the country needs to be run under martial law.

The new Haitian martial law government must tackle three issues: Stability, corruption and long-term capacity building. It must use Haitian nationalism and pride as a tool to achieve it's goals.

Haiti should be run as a protectorate of the UN, France or US. Kind of like a benign dictatorship. Run in a fashion similar to how China and Iraq operate. This type of governance would help Haiti "move from misery to poverty." The protectorate would need large subsidies from France, US, and Canada to operate.

France gives the residents of Martinique and Guadeloupe about $3000-$4000 in subsidies per capita (Martinique and Guadeloup per capita income is about $20000) per year. With 9 million Haitians, that would be about $27-36 Billion per year subsidy. Perhaps a figure of $500 to $1000 per capita ($4.5 to 9.0 Billion is required). That is the size of the yearly effort.

That much money requires a large effort to spend wisely and for the long term. Building capacity is a very large effort which has been master by few: only Korea, China and Brazil come to mind. The money must be spent to develop and educated ruling class (military, political, judicial and economic) and then expanded from there.

That would involve a gigantic commitment of cash by many nations to fix the problem. The amount is still less than what was spent Iraq and Afghanistan($1 Trillion Dollars). Any other approach is a just a band aid.

So what can you do to really help. Well, unfortunately, there aren't many options:
1. Give money to a charity. Fund charities that use Haitian workers and buy Haitian products.
2. Buy Haitian products: Coffee, Mangos(the best in the world), peanut butter, and textiles and manufactured products.
3. Visit Haiti as a tourist. Or make sure one of your cruise stops is Labadee.
4. Lobby your congressman or senator to allow 100,000 Haitian refugees into the US both temporarily and permanently.

Other ideas include
1. Free or cheap money transfer to Haiti. It can cost up to $100 dollars to send $1000 to Haiti.
2. Closer integration with CARICOM states. Sadly CARICOM imports more from China than from Haiti.
3. Capacity building efforts around education.
4. Stop US agriculture subsidies on products sent to Haiti or raise local tariffs to stop low cost food imports.
5. Encourage other countries to take refugees. Haiti needs to export about 1 million people to be stable. Those 1 million would send money back and return to build the country.
6. Increase the US limit on Haitian immigration from 21,000 at year to 50,000.
7. Promote family planning. The population is out of control leading to extreme poverty. China is a world model for family planning and now they are a middle class country.
8. Promote investments in education. Haiti need to expand its small educational system by 3X - 5X to develop a nation of leaders.
9. Promote Haitian nationalism.


Ok, here are some of the best Haiti articles I could find.

http://www.jamaica-gleaner.com/gleaner/20100201/lead/lead1.html
http://www.nytimes.com/2010/02/01/opinion/01mon1.html
http://www.nytimes.com/2010/01/31/world/americas/31reconstruct.html

v2

Stimulus update

The white house released the second quarterly report on the economic stimulus bill. The bill, formally known as the American Recovery and Reinvestment Act of 2009 (ARRA), has a large tracking requirement which gives a detailed view of the spending.

The summary press release is here. The report can be read here.

Here are some highlights from the press release:
$263 billion of $787 billion have been spent or deducted from tax receipts. The spending raised GDP by around 2% and increased employment 640,000 jobs. Total mployment was projected to expand by 1.5 to 2 million jobs due to multiplier effects.

Research File Dump

This entry is a list of research ideas to be checked out.


Offshoring american jobs: What response from US economic policy
bhagwati and blinder
Manikew light-skinned black article in book
contractor hiring of minorities
NJ contractor hiring
minority non-college youth
youth unemployment
where do blacks work ( started)
carver federal saving -- examination
franz liechter 10-block rule
education charts and graphs
minorities and innovation
depth of recession prediction. Compare highering with past recessions and recover. Job growth is slow
Productivity is slowing toward covergence
What is EPA cheif Lisa Jackson up to
fdic study: Black use of check cashing places