Delaware = Cayman Islands North

If you every wonder about the power companies to "rig" the system in their favor, take a look a Delaware.  The state is know as Cayman Islands North. Delaware is a state that benefits from helping companies and individuals avoid state taxes. It also promotes business friendly, "light" regulation.  The state has been used by money-launders and arms smugglers.

Almost all of the financial activities in the state are linked to corporate tax reduction or tax avoidance. There was some back office check processing going on during the 90's and 00's but that has greatly diminished. About 50% of the fortune 500 are incorporated in Delaware. There is little real economic activity going on in Delaware outside of Dupont and Perdue Chickens. Delaware is little natural resources and remained a slave state until emancipation.

Instead what Delaware has done is exploit a loophole in the tax system allowing companies to "shop" for a state jurisdiction for tax purposes. For state tax purposes, companies recognize some their US profits in 0% tax Delaware regardless of where they are earned rather than in high tax NY state. Corporation use this tactic to reduce taxes on royalties and other payment that can be recognized in any jurisdiction.

Though it is small potatoes  Delaware has also benefited greatly from individuals avoiding local sales taxes.  People from Maryland, Pennsylvania and New Jersey drive to Delaware for consumer products like liquor, appliances, flat screen TVs and cars.  This damages state tax coffers resulting in higher taxes for everyone.

To it's credit, Delaware has set-up specialized courts, like the court of chancellory, to hear business cases.

The sad part is that Delaware is really usurped federal power.  And not in a good way like the Pennsylvania Department of Agriculture or California EPA's Air Resources Board. Delaware let corporations avoid taxes and robs other states revenues.

You can read more details in the NYT piece: "How Delaware thrives as a corporate tax haven."

Economic Reasons are five of the top ten reasons for joining the military

We, at the Evil Black Economis,t have been thinking about guaranteed jobs program with the government as the employer of last resort. So we are looking at the government programs that most closely resemble a jobs programs: the military, homeland security and civilian criminal justice (police, fire, and corrections).  Each of these job classes produces little to no value added in society or contributes to GDP other than through salaries.

We believe these areas, which are really cost avoiders, are perfect examples of government jobs programs.

Here are the top ten reasons to enlist in the armed forces.  This list was taken from a military recruiter on the military.com website. So it boils down to one expert opinion.

Here is the list.  Reason which are economic in nature tagged with an "E".

Education ([E]conomic)
Money (E)
Medical Coverage (E)
Career (E)
Travel and Adventure
Camaraderie
Sense of Direction
Real World Skill (E)
Honor
Other but Military Related - Like the idea, weapons and technology, a challenge, friend or family member is in the service, etc.

Affirmative Action is Everywhere

Affirmative action is everywhere these days and no one has a problem with it when the beneficiaries are US military personnel.  Veterans affirmative action even has quotas. And the public is completely accepting of this type of affirmative action.

 The Whitehouse web site has some new details on the affirmative action program for military personnel and their spouses. The program is called "Joining Forces Employment" is a program to get large corporations to hire veterans. The program includes specific commitments (quotas). Michelle Obama recently announced new hiring commitments from companies at  the Whitehouse.

One bit of good news is that poor people and blacks are over represented in the military.

The Whitehouse story is here.

The Joining Forces website is here.

Here is a great report from the Army called "Blacks in the US Army" that has statistics on black participation in the armed forces.

Military.com reports that 5 of the top 10 reasons for joining the military are economic.

February unemployment review: NFP jumps to 236,000 new jobs but all other stats are the same

BLS Unemployment Report Review for February

Ok, so here is a really good lesson in statistics.  The February unemployment report, which was released on  8, 2013, shows a jump of 236,000 jobs.  A huge jump over the from February  increase (119K).  So, we always have to remember the number can fluctuate by 100K up or down and that the number is constantly revised.

So what looks like a great number is in fact a random jump with no supporting indicators. Naturally, you  would expect to see the figure revised downward.  Instead, the figure was revised upward in April to 268,000 new jobs. And January was revised up to 148K. What the heck?

Long story short the unemployment rate (7.7%) and the non farm payroll number (236K), are the headline numbers, but they can randomly bounce around a very large amount.  You really have to look at the other numbers to get a complete picture.

Unemployment report summary and reaction

 Non Farm Payroll jumped by 236,000; a figure that is way above average.  There was strong growth in all employment categories except education and state government. The unemployment rate dropped 0.1% to a calculated 7.7%.  

The chart below shows the slow decline in the national unemployment rate.

The  large increase in payrolls came as unexpected news. The stock market surged on the news.   All other unemployment statistics were unchanged.

The national unemployment rate has reached a plateau around 7.8% with little sign of reduction in a slow moving economy.  The Employment to Population ratio was measured at 58.6%, the lowest since October 1983. The participation rate was rate 63.5% the lowest since June 1979. Both have barely moved in the past year.  The low values point to a huge number of people who have dropped out of the labor force.

Household Survey Results for February

The household data survey reported that the total labor force expanded by 165,000 while the number employed expanded by 170,000.  

The black unemployment rate stayed at 13.8%.  The reported black labor force decreased by 2000 people and -14,000 less black people said they were working.  Black employment was 16,059,000 workers.  Black teenage unemployment was 43% versus 22% for whites and 27% for Hispanics. Unemployment rate for Hispanics/Latinos was 9.6% while the rate for whites was 6.8%.

The black unemployment rate has reached a plateau while the national rate continues to decline.

The chart below shows the real black unemployment rate (Black U-6) stuck around 20% even as US national rate slowly declines.

The long-term unemployed (27 weeks or more) was 4.8 million people which represents 40% of the unemployed.  The median duration of unemployment was 17.8  weeks  while the average duration was 36.9 weeks.  People are finding jobs slightly faster.

The “work part-time, wants full-time,” number was 8.0 million.  These people are considered under employed and would like additional work.  About 2.6 million workers were marginally attached to the labor pool.  They have looked for work in the last 12 months but not in the last four weeks.   And there were 885K discouraged workers (part of marginally attached) who are not looking because they believe there are no jobs for them.

Establishment Survey Results for February

Non-Farm Payrolls rose by 236,000 positions in February.  The growth coming in construction, retail trade, business services, and healthcare. Construction was a very strong area of the job growth.  Construction added 48,000 jobs while retail trade added +24,000. Government lost -10,000 jobs. 

The following chart show the huge jump in private jobs which added 246,000 jobs in February

You can see the wide spread growth across all job categories except for education and state government.

Non-Farm Payroll Revision

Non-farm payrolls were revised in December upward to 219K from 196K and for January 2013 from 157K to 119K. The January revision was the first time we have had a negative revision in 6 months which may indicate a slowing economy.  

The average work week was at 34.5 hours and wages added 4 cent in February.

ADP

 ADP reported an increase in private payrolls of 198,000 positions for February.  Small business (1-49 headcount) added 77,000 jobs; medium size (50-499) added 65,000 and large companies (500+) increased workers by 57,000. The breakdown is important because large businesses tend to pay employee more. 

White Networks block Blacks from Jobs

Nancy DiTomaso knows how white "networks" keep blacks from job opportunities.  Her book: "The American Non-Dilemma: Racial Inequality without Racism" delves into how whites retain their privileges while behaving in a self-described non-racist manner.

There is a story from Huffington Post here: "Black Unemployment Driven by White's favors for friends."

Nancy DiTomaso has been researching the topic for years.  Here is a great piece from a PBS program called "Race - The power of illusion" produced by California Newsreel in 2003. DiTomaso discusses racial inequality and hiring discrimination.

Race at Work: The realities of Race and Criminal Record in NYC Job Market

Here some old news but I don't want to lose track of it, so I am saving it in a blog post.

Devah Pager and Bruce Western did some great work in 2003 using job testers in NYC.  They used identical testers who were different only by race: black, white and Hispanic.   They then added the variable of a criminal record with a felony conviction.

The testers were choosen for similar background, appearance, and verbal skills.  The were all college graduates but representing themselves as high school diploma holders with solid work experience in the field. The testers were also coached to use similar self presentation styles.  They went to 1470 interviews.

The results were indicative of significant racial discrimination in hiring.

23% of whites were offered a job or a call back
19% of Hispanics a similar positive response
and 13% of black got a good response

A summary report from the NYC commission on human rights is here.

The detailed study by Devah Pager is here.

And here is Devah Pager dissertation which has the original research here.

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Rage against the "Job-Killing" machine

We are feeling the pain of automation

One of the most important and under reported stories of our time has finally hit the big time.  Technology and automation are destroying jobs AND we are feeling it. For the past 100 years, technology has helped developed countries grow and raise their standard of living. It has created a high standard of living where everyone in society has all of life's basic necessities.  Technology has killed jobs but added many more until recently.

Technology did cause people to lose jobs but in a growth else where quickly absorbed the surplus. Most jobs required low-skill levels and hard work, so workers were quickly recycled in to other areas of the economy.

When the industrial revolution first started in Britain, the new machines were feared by the populous who thought they would put people out of work.  Instead, growing wages fueled demand for new material goods, the country grew, and the displaced workers moved on to other, newer industries.  Britain's internal growth and lack of global competition allowed the country to shift workers to more productive jobs.  Britain's financial system was designed to supported industry. Labor captured most of the increase in wealth and funneled it back into the economy as demand. The results was a prosperous cycle of demand and growth.

What has happened during the late 20th century is that the 100 year cycle of growing wages, growing demand and national income growth has been broken.  No one is complete sure why the link between growth and wage is broken.  Many economists suspect globalization / outsourcing (global labor competition, financial engineering, regulatory manipulation by large companies, and technology change).  We are going to look at technological change.

As we mentioned earlier, technology killing jobs has been in the news because of a great, new book called  "Race Against the Machine" by Erik Brynjolfsson and Andrew McAfee. Their basic theory is that smarter machines are reducing the demand for white collar labor, however the change can be absorbed as long as wages are sufficient to generate demand for technology.  In addition, two other factors have conspired to reduce employment: 1) developed countries are net importers of goods and 2) process (versus product) technologies have become incredibly efficient by historical standards.

There is no shortage of new machines and innovation, but the country cannot afford to buy them because wages have stagnated.  In addition, developed countries are net importers further reducing growth and wages.

We want to offer some further background reading on the problem:

Race against the machine
Economist: Has the idea machine broken down ?
60 Minutes

The dilemma  was summarized by Walter Reuther, the leader of the United Auto Workers union, in a famous anecdote he would tell.

'After touring a factory filled with lots of automated car making equipment, a manager asked Reuther how he was going to collect union dues from all the machines making cars."  Reuther replied "How are you going to sell cars to these machines ?" '

Here is some background on the quote.

Finally, just to keep the problem real, here are some video's of Robots in Action

Packaging robots from ABB on Youtube.
ABB dual arm concept robot is here. 

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January 2013 Employment Review: No Big News here just steady growth

Yes, I know it's March, but we are playing catch-up.

The January 2013 employment situation report was issued by the Bureau of Labor Statistics on February 1st, 2013.  The report had no news, which is good news.  The unemployment rate rose slightly to 7.9% and Non Farm Payroll increased by 157,000 workers.  The most economists believe the Non Farm Payroll (NFP) number must be greater than 200,000 to reduce unemployment. Construction and retail trade added jobs as did healthcare and leisure/hospitality.

So, if we had to pick a story for January, it would be: We won the election.  Whew!!! But the majpr labor  economic story was the drop in median (half above/half below) unemployment duration.  It dropped from 18 weeks in December 2012 to 16 weeks in January 2013. A huge change due to the long-term unemployed either finding work or dropping out of the labor force.

The BLS also published some interesting data on 2012  revisions.  The changes add an additional 335,000 jobs over the year. So the economy was better than we thought in 2012. I still laugh at Mitt Romney calling one unemployment report, "a hammer blow to the middle class."  All I can say again is: whew! that was close.

In other news, Washington has been focused on mandatory budget cuts collectively known as "the  sequester." Obama overstated the impact of the cuts to try to get a larger deal with the Republicans.

Household Survey Results

Every significant measure showed little or no change in January. The unemployment rate moved up slightly to 7.9%.  There were 12.3 million people unemployed. The labor force participation rate stayed at 63.6%.
U-6, which measures the number of people who want jobs or additional hours was 14.4%.

The chart below shows the gradual decline in the national unemployment rate which is currently at 7.9%.

The white(7.0%), black(13.8%) and Hispanic (9.7%)  employment rates also barely changed in January. The estimated "real" black unemployment rate (black U-6) was 20.3%. Rate has moved little since January 2012 (20.4%). 

The black labor force grew by 238,000 to 18.6 million. Sixteen million black people were employed and labor force participation rate was 61.75%.

The number of long-term unemployed stayed at 4.7 million but the median duration of unemployment decreased by two week to 16.0 weeks. Median duration was 20.8 weeks in January 2012.  The percentage of people who are unemployed longer than 26 weeks also shrank to 38%. Two million, four hundred thousand workers were classified as marginally attached and 800K as discouraged.  Both groups has seen large drops in their numbers during 2012.

The economy continued to make progress "filling in" the job hole created by the recession. The economy has added approximately 5.5 million jobs since February 2010.

Business Survey Results

Non Farm Payrolls grew by 157,00 jobs. Jobs grew in construction,  wholesale and retail trade, business services, health care and leisure and hospitality.

The private sector added 166,000 jobs and government gave back 9,000. 

Every sector added jobs except for transportation and government. 

4th African American Economic Summit at Howard University

The 4th annual African American Economic Summit was held at Howard University on February 1st, 2013.  The program was sponsored by Howard University and The Joint Center for Political and Economic Studies.

The conference feature several well known black economic figures:

Bennard E. Andersen

The sessions were

Session 1: Economic Distress in the United States and the Urgency of Action
Benard E. Anderson, U of Penn, Wharton
Bobby Scott, Congressmen (VA-3)
Lorenzo Morris, HU Political Science Department
Rodney Green, HU, Econ Department Chairman
Alexander De Leon, Student, HU, Econ, Master's degree candidate

Anderson define the problem and the lack of black wealth
Scott said we have not money
Morris said blacks may have missed the window to make change
Green said the problem is capitalism and corporations are sitting on $5 trillion in cash and won't invest to make jobs. We may have to consider a mass movement for broader systemic change
De Leon

Session 2: Employment and Wealth: Policies for Black Americans and All Americans

William "Sandy" Darity jr., Duke University - Painted a great picture of the dismal employment situations in the US.  He discussed a federal job guarentee to be paid for by poverty programs.
Professor Haydar Kurban, HU econonomics department - Proposed using taxes on financial market to create jobs. Discuss
Darrick Hamilton, Econ department, New School. Racial wealth gap is huge. Proposes baby bonds for education, housing or business creation
William Spriggs, Howard U, Econ.  AFL-CIO Economist. - Raise the minimum wage
Enrique Lopezlira, Howard University, Student
Charles Bedsee, Howard Econ



A video of the sessions is available at the website of the Howard University Department of Economics.



The full list of sponsors were:

Howard University
Joint Center for Political and Economic Studies
Howard University Department of Economics
Howard University Center for Urban Progress
Howard University Center on Race and Wealth
Duke University's Research Network on Racial and Ethnic Inequality
Ron Walters Leadership and public policy center at Howard University

Immigration Discussion and Position

The Evil Black Economist publication is for limited immigration reform. We believe that immigration of certain groups hurts the wages of existing black, poor and foreign born US citizens. Current US immigration flows has been shown to hurt the wages of men with high school or less education levels. It has also been shown to reduce the wages of other recent immigrants.

When countries decided to accept immigrants they must decide who can immigrate, how many immigrants to let in the country and who will pay the cost and receive the benefits of immigration.

The United States believes that overall immigration is a slightly beneficial activity. Immigrants improve the general economic environment by contributing to growth. They buy stuff, eat and pay taxes. In roughly the same amount that they receive in government benefits including school. Finally, immigration pressure on wages helps keeps inflation low.

However, immigration disproportionally affects poor people: blacks, Hispanics and poor whites more than other groups.  In low growth, non-full employment labor markets immigrants additional immigrants create a labor surplus which reduce wages and benefits. In addition, the traditional, word-of-mouth networks used to fill immigrant jobs supports discrimination.


The immigration proposals we are discussing are:

1) changing the legal status of 11 million illegal immigrants to allow them to work legally in the United States.
2) increasing the H1-B Visa program from 50K to 300K and scrapping country limits
3) giving green cards to anyone with a master degree in technical field.

Immigration is a difficult topic to research since there are few good studies about the impact of immigration on wages. A quick review of articles shows an effective 5% decrease wages for people who did not graduate high-school. And a 10% decrease for existing immigrants.

The benefits of high skilled immigration are captured by large corporations like Microsoft, IBM, HP and Cognizant. The benefits of low skilled immigration are seen in cheap food, housing and restaurant prices.

Here are some important articles and studies on immigration's impact on the wages of US citizens.

The best summary is by Neil Henderson in the Washington Post: "Effect of immigration on jobs, wages is difficult for economists to nail down."

The defining study in the area is by George Borjas at Harvard. He finds that immigration has hurt wages for some groups by 10% in his report:  "Increasing the supply of Labor Through Immigration: Measuring the impact on Native Born Workers."

The Economic Policy Institute has a study called "Immigration and Wages" that finds no effect on native born workers.

Geovanni Peri argues immigration is beneficial at the San Francisco Fed in an article called "The Effect of Immigrants on U.S. Employment and Productivity". However, his models seems to assume US citizens have moved to high-skill (high communication) work and low-skill immigration is complementary not competitive.

Albert Saiz in the Philadelphia Fed Newsletter also says immigration's total effects on the economy are mild.

The reason immigration effect are so hard to document is because of government and business policies that make collecting statistics impossible. Business that employ illegal immigrants refuse to report the information.  Therefore we have few good detailed studies that document the effects of immigration on different population groups over a long period..  Several studies use national averages to infer weak effects from immigration.

In addition, the studies may understate illegal employment since undocumented workers operate in the cash or "black" economy.  You have to assume that someone who is here illegally and cannot receive benefits (other than an education for their kids) has some way of surviving(i.e., performing work).

I don't think all 12 million will instantly become legal workers and if verification happens before legalization, some could lose jobs. When you read the literature the economic benefit of immigration is very slightly positive from lower costs (lower wage pressure) and population effects.  Specific groups such as high school drop outs and technical workers can take a 5-10% hit.


Here is what we stand for.

The Evil Black Economist blog is for using market based limits tied to the national unemployment rate and unemployment rate in different sectors of the economy.

 We are for giving a limited number of illegal immigrants (2-3 million) a route to legal work status and citizenship over a 10 year period.

We are against any increase in the H-1B Visa program.  We are against removing country limits.  We are against eliminating diversity visas. The H-1B visa program has been abused by corporations and reduced wages for technical employees. Corporations are ducking their responsbility to re-training and develop existing employees for new jobs.

We are for giving a limited number of technical master degree visas to foreign students who want to stay.

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