Sunday, June 26, 2016

Brexit: The United Kingdom Referendum on European Union Membership

The UK votes to leave the European Union.

On Thursday, June 25rd, 2016, the United Kingdom voted 52% to 48% to leave the European Union. The majority of voters in England and Wales (except for London) voted to leave the EU, while voters in Scotland and Northern Ireland voted to remain with the EU. Turnout was especially strong among the leave side.

The British decision to exit the EU is about the failure of globalization to improve the standard of living for the average person in the UK. The vote expresses the concern that the economic position of poor and middle class workers has gotten worse.  The UK voters believe they have “lost” out due to increased competition from immigrants. And the voters want to blame and punish someone.

In addition, our western political systems have been unable “cushion the blow” on those affected by globalization. Neither the market economy nor government has delivered economic security and prosperity to the middle class.  There are fewer jobs, higher prices, and less opportunity. The next generation will be worse than the current.   And forget the effects on the poor in rich countries.

The theory behind globalization is an old and simple theory that is considered economic gospel.  It is David Ricardo’s theory of comparative advantage that says trade make everyone better regardless of comparative position. Basically, even if I make everything better and cheaper than you trade will still help us both. Trade will increase growth and make everyone better off.  The theory works great in a simplified world; but not the real world. In our world, there are layers of complicating factors such as technology, monopolies and governments. The net results of neo-liberal free trade has been a siphoning off of the benefits by corporations and the rich, leaving many in the developed world worse off. In that kind of environment, we can understand voting against trade and globalization.

Globalization has been a huge success in some places (Japan, Korea, China, Panama, India, Brazil) in the developed world. Global living standards how never been higher and the number of people in poverty, lower.  A remarkable 1.5 billion people have transitioned from poverty to lower middle class in a generation.

Branko Milanovic has done some great work documenting the winners and losers over the past 20 years. Here is a link to an article from the world bank about his work. 

But that transfer of wealth did not come for free. There was no magical growth pill or free lunch. It came at the crushing expense of the poor and middle class in developed countries. Through the process of immigration to developed countries, offshore manufacturing and outsourcing services to low-wage countries; large chunks of the economy were dismantled.

The chart below shows the global winners and losers for the past 20 years. (Source: Branko Milanovic)

The good news is that UK referendum on leaving the European Union opens a huge space to discuss economic inequality in the US and developed countries. This country seems ready to discuss class differences without the smokescreen of immigration and white male privilege.  We are open to having a discussion (negotiation) on how to fairly allocate the bounty of our country.

We don’t have to tell you that Black, Latino/Hispanic and poor people have also suffered tremendously under increased immigration, outsourcing and poor job prospects. Rich whites and elites were unconcerned to the plight of Blacks because it did not affect them. Now that the White middle class is starting to feel the pain of zero wage growth and poor job prospects, we may see progress on changing the economic and political system to benefit more Americans.

The future may look like Japan

One developed country with few trade problems is Japan.  Japan is highly nationalistic.  They don’t buy foreign goods. They are intensely focused on exports. They have consistently run a trade surplus for years.   Japan is also completely closed to immigration. There are limited work visas. Corporations must instead re- train workers for new positions.  Japan also promotes job security as national priority.  Corporations are not overly concerned with profits or shareholder returns. A complex web of corporate holdings limits the power of shareholders. 

Japan also has zero population growth. Japan spends very little on national defense.  Interestingly, Japan is also racist and xenophobic by our standards.  But Japan policies work.  They have the lowest level of inequality of all G20 nations.


Politicians and decision makers can no longer ignore the victims of globalization.  The are angry and they vote.

Of related news, the UK Mirror says that 67% of UK Asian voters and 73% of Black voters chose “Remain”.

Saturday, June 11, 2016

The effect of Incarceration on unemployment, related articles and data

The Washington Post has a story: "America has locked up so many black people it has warped our sense of reality". We want to check some of WP 's facts and conclusions.  We also want to extend our analysis of the real Black unemployment rate to include incarceration statistics.

The two most important publications in corrections statistics are the following reports published by the Department of Justice, Bureau of Justice Statistics.

Correctional population in the US, 2014

Prisoners in 2014

Probation and Parolee in the US, 2014

Here is a summary of the important statistical facts in each publication.

Important Facts(2014)

6,851,000 under the supervision of adult corrections system
4,708,100 Community supervision
   3,864,100 Probation
   856,900 Parole

2,224,400 Incarcerated
   1,561,500  Federal and State
    1,350,958 State
    210,567 Federal
   744,600 Local

1,448,564 Male
112,961 Female

1,402,404 - Male Prisoners sentenced more than a year (may not match total by definition)
   453,500 White Male
   516,900 Black Male
   308,700 Hispanic Male
   123,300 Other Male

106,232 All Female prisoners sentenced more than a year (may not match total by definition)
   53,100 White female
   22,600 Black female
   17,800 Hispanic female
   12,800 Other female


The correctional population is the total of all people under the supervision of the corrections systm which include probation, parole and incarceration.

Prison - Sentenced offenders serving more than a year. State and Federal.

Jail - Local incarceration for pre-trial and post-trail sentences of one year or less.

Private Prisons -

Prisoners - Incarcerated people at the state and federal level.

Per 100,000 - is the bench mark for comparing the incarceration rate across different countries.

Unemployment rate for Parolees and Probation is 40 to 60%.

More facts:

National Employment Law Project estimates 65 million people have a criminal record or 28% of the adult population has a criminal record. Nation: "Boxed In: How a criminal record keeps you unemployed for life"

Center for Economic Policy and Research estimated that bias against workers with a criminal record reduced the US GDP by $57 to 64 billion in 2008.

A 2010 Pew Charitable Trust study found that incarceration reduces houry wages by 11 percent and annual wages by 40 percent.

Center on Budget and Policy Priorities in 2015 stated that 70 million people have a criminal record. In "Strategies for Full Employment through reform of the criminal Justice System"

82 billion was spent on jails and prison
$250 billion on courts and policing

Kaiser Family Foundation/New York Times/CBS news poll of prime working age men 25-54 who were unemployed found that 34 percent had a criminal conviction. 64% wanted to work and 45% had looked for a job.

Sunday, June 5, 2016

Low wage jobs vs. high wage jobs.

Separate data from the National Employment Law Project show low-wage job gains outpacing higher-wage jobs growth. There are now 1.2 million fewer jobs in mid- and higher-wage industries than there were prior to the Great Recession, according to the data. In contrast, there are 2.3 million more jobs in lower-wage sectors than before the recession.

Universal Basic Income Articles and Discussion. Swiss voters reject basic income 77% to 23%

Today, June 5th, 2016, Swiss voters reject a proposal to give each citizen 2500 Euro per month. Voters indicated it would devalue work and encourage immigration. 

Universal Basic Income or Basic Income

The idea of Universal Basic Income has been around for a while. The idea is that the government would give a basic level of income each year to every citizen to reduce poverty and promote human development. The benefit could vary by amount and need but everyone would receive some benefit. The benefit could be large enough to lift them out of poverty or a supplement to existing programs like food stamps, TANF, SSI, health care or housing support. However, it would be universal like social security to build broad public support. 

In the United States, the general public is starting to recognize basic income can help eliminate poverty and economic insecurity.  As of 2014 census, 14.8% of the US population lives below the poverty line. There were 46.7 million people in poverty.

The official poverty rate is here: “Income and Poverty in the United States: 2014

The topic resurfaced to a broader public when Farhad Manjoo reported on “silicon valley proposals to  give everyone an income so people will not fight job-killing technologies.

Manjoo was discussing the ideas of Scott Santens in his NYT piece.  Mr. Santens is profiled here in the Atlantic. “What if everybody didn’t have to work to get paid." . Mr. Santens also moderates the reddit discussion of Basic Income.  

UBI is being widely discussed as the economic climate worsens and insecurity grows for many people.

The pro-UBI side argues,
1)      UBI lets people attain their full potential. “What would you do if all your basic needs were taken care of ?”
2)      Helps people find the right job
3)      UBI Is efficient to administer.

The anti-UBI side argues,
1               1)      It destroys the work ethic
2               2)      BI is too expensive to afford
3               3)      Would encourage immigration
4               4)      Does not factor in geographic cost differences such as housing costs.

In the United States, giving 300 million people $10,000 a year would cost $3 trillion dollars. Currently, military spending is the largest discretionary budget item at $598 billion out of a total discretionary spend of $1.11 trillion dollars

Basic Income Discussion

About a year ago some silicon valley folks wrote about UBI because they were afraid people would oppose job killing robots.  The widely read piece rekindled the discussion of UBI.

Eduardo Porter from New York Times has written on UBI here: “Universal Basic Income is a poor tool to fight poverty”. He calls the plans too expensive and “Poorly thought out”

We highly recommend this great overview of Basic Income from 538. The story by Andrews Flowers is well researched and has lots of links. “What would happen if we just gave people money” 

Economist says it too expensive here. “Basically Unaffordable

Tony Atkinson advocates for a participation credit. You must contribute to society in some way either by working, looking for work or volunteering.

Roosevelt Institute has an article by Mike Konczal against UBI “Guest post: Max Sawicky on the liberal case against Universal Basic Income” 

Mr. Sawicky, argues that the cost is too expensive and there are other ways to achieve the same objective.  These include full employment, a higher minimum wage, support for unions, federalizing temporary assistance for needy families (TANF) and making the government the employer of last resort.  These measures are “more in keeping with our current system and political culture.” He says UBI is a pipe dream and we are better off increasing TANF, if we really want to reduce poverty.

UBI in real life

Besides the Swiss, a number of cities and countrie are conducting experiments on basic income.
Silicon Valley Incubator Y Combinator is funding a research project on basic income in Oakland.  The application is here.

The Dutch city of Utrecht is paying people whether they work or not. They are experimenting with paying clients about 1000 euros each month without any means test. Here.

Finland is also looking at a UBI experiment.  They would give each citizen 800 euro a month.

Finally, one of the longest running website on Basic Income is which is run by the Basic Income Earth Network(BIEN) which has the most update to date news on basic income issues in the world.

Blog Archive