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The Rise of the West. Countries get rich because they become particularly skilled in certain industries that they can sell in exchange for money. So why are McDonald's workers in the U.S. or Western Europe earning up to 10-times more than in India, China, or Latin America? It's not that Chinese and Chileans are less skilled at heating burgers. Rather it has everything to do with the economy outside of McDonald's kitchens.
For almost two centuries, starting around 1800, the history of the global economy was broadly one of divergence in average incomes. In relative terms, rich countries got even richer. There was growth in the poorer countries, too, but it was slower than rich-country growth, and the discrepancy in prosperity between rich and poor countries increased.
CommentsThis “divergence” was very pronounced in colonial times. It slowed after the 1940’s, but it was only around 1990 that an entirely new trend could be observed – convergence between average incomes in the group of rich countries and the rest of the world. From 1990 to 2010, average per capita income in the emerging and developing countries grew almost three times as fast as average income in Europe, North America, and Japan, compared to lower or, at most, equal growth rates for almost two centuries.
CommentsThis has been a revolutionary change, but will this 20-year-old trend continue? Will convergence remain rapid, or will it be a passing phase in world economic history?
Among executive-board members, women earn 17% less than their male counterparts. There are plenty of plausible explanations for this disparity, from interruptions to women’s careers to old-fashioned discrimination. But the authors find that this pay gap can be fully explained by the effect of executives’ networks. Men can leverage a large network into more senior positions or a seat on a more lucrative board; women don’t seem to be able to.
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, there is only a marginal pay difference between men and women when it comes to non-executive directors, and no difference in the effectiveness of their networks. It is possible that this reflects pressure for “gender quotas” on corporate boards. Women are able to find their way onto shortlists for lower-paid, non-executive positions. But that’s not where the real power lies.
Singapore has historically been seen as a canary in the coal mine of the world economy, given its extreme vulnerability to the swings of global trade.
But now, analysts at one bank have raised concern about a data point not usually seen as a threat: social and political discontent.
alongside the rise of the Internet and the empowerment of the Internet generation has emerged the greatest inequalities of wealth and privilege that any of the increasingly Internet enabled economies/societies have experienced at least since the great Depression and perhaps since the beginnings of systematic economic record keeping. The association between the rise of inequality and the rise of the Internet has not yet been explained and if may simply be a coincidence but somehow I’m doubtful and we await a newer generation of rather more critical and less dewey economists to give us the models and explanations for this co-evolution.
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But in the context of the Open Government Partnership and the 70 or so countries that have already committed themselves to this or are in the process I’m not sure that the world can afford to wait to see whether this correlation is direct, indirect or spurious especially if we can recognize that in the world of OGP, the currency of accumulation and concentration is not raw economic wealth but rather raw political power.
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in the same way as there appears to be an association between the rise of the Internet and increasing concentrations of wealth one might anticipate that the rise of Internet enabled structures of government might be associated with the increasing concentration of political power in fewer and fewer hands and particularly the hands of those most adept at manipulating the artifacts and symbols of the new Internet age.
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The most significant driving force of any city is its people. It is crucial to have a livable environment for increasingly mobile populations, and to attract a significant workforce. More than one-third of the people in New York and London are foreign-born. Despite their astonishing growth, Asian economic powerhouses fail to reach that level of cosmopolitan culture. New York or London will continue to top the indices, but only if they ensure their strong cultural offers are unmatched and maintain open immigration policies.
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as soon as a centa-millionaire in Moscow, Beijing or São Paolo makes their fortune, the first thing they do is figure out how they can ferret away large chunks of that wealth to countries that guarantee political and personal freedoms, have sound legal systems, a favorable tax environment, good security and good schools for their kids.
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what Benedict Anderson describes, that ”the Bangkok bourgeoisie isn’t far from that of Manila, Kuala Lumpur, Singapore and Jakarta: timid, selfish, uncultured, consumerist, and without any decent vision of the future of the country”, is a fairly accurate picture, particularly with regards to the upper middle classes in Singapore.
Inequality in the world’s poorest countries is considered one of the main barriers to development. But this column points out that the inequality is about much more than the über-rich and the destitute – it is about access to political power. This column looks at political dynasties, where leadership is passed down through family ties, to see if these are a cause of the persistent social and economic divides.
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The rise of elected officials with extensive familial links to present and previous politicians in power signals a growing inequality in access to power and political influence. That, in turn, could also affect the persistence and prevalence of social and economic divides.
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one study of political dynasties in the US Congress showed how dynasties helped to improve the gender balance in the US Congress, by allowing more female legislators to get in via their familial ties (Dal Bo et al 2009).
With professional & business services currently employing about 18 million people, as compared to about 12 million in manufacturing, someone will have to remind me why manufacturing is supposed to be a special sector and not not professional and business services.
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Why is manufacturing special? Because someone with a high school diploma can make a better living there than they can in most other sectors of the economy that they are qualified to work for.
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Manufacturing is special because it tends to pay generally good wages to people whose skills and education are limited.
if the super-rich save a lot, ever-increasing income concentration can be expected to lead to a chronic excess of planned savings over investment.
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huge income concentration at the top in the US led to policies aimed at encouraging unsustainable borrowing by lower- and middle-income groups, through subsidies and loan guarantees in the housing sector and loose monetary policy. There was also an explosion of credit-card debt. These groups protected the growth in consumption to which they had become accustomed by going more deeply into debt. Indirectly, the very rich, some of them outside the US, lent to the other income groups, with the financial sector intermediating in aggressive ways. This unsustainable process came to a crashing halt in 2008.
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Macroeconomic policy can try to compensate through deficit spending and very low interest rates. Or an undervalued exchange rate can help to export the lack of domestic demand. But if the share of the highest income groups keeps rising, the problem will remain chronic. And, at some point, when public debt has become too large to allow continued deficit spending, or when interest rates are close to their zero lower bound, the system runs out of solutions.
young women who won access to the pill in the 1960s ended up earning an 8 percent premium on their hourly wages by age 50.
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The Great Gatsby Curve - Intergenerational social mobility and equality - graph by Miles Corac
Imagine that you are self-employed. Every year, you earn $100,000, pay 35% in taxes and have $65,000 left in your pocket. Now you form a corporation. $100,000 goes into the corporation. There is a corporate tax rate of 25%, so that leaves $75,000 which you pay to yourself as a dividend which are taxed at 15% which leaves you roughly $65,000. So sure, you could say that your tax rate was 15%, but that would be nonsensical. Nothing of significance has changed. What about if you get a partner and the corporation earns $200,000 paying $65,000 to each of you? Well, what changed? Nothing.
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The problem is that once again people are confusing tax incidence with tax collection. The difference is simple: If you make a gasoline company pay $1 for every gallon of gas they sell, the tax collection is a burden of $1 per gallon of gas on the gasoline company. But the tax incidence is very different since the gas company will raise their prices by some amount. So if they raise their prices by 90 cents, the tax incidence is 90 cents on consumers and 10 cents on producers. However, most people will stop at who wrote the check to the IRS. This is a basic mistake that people make all the time and teaching people about tax incidence is a job that every economist takes on when they talk about taxes.
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Isn’t it true that the burden of the corporate tax is born by both shareholders, vendors and consumers? Well of course, but we need to choose what we’re talking about and stick to it. If we talk about the incidence of the tax, we need to remember that the income tax paid by Buffett’s secretary creates a burden for both her and her employer. It’s quite obvious that Buffett and Obama are not talking about the burden of taxation. Otherwise, Mr Buffett could not get his numbers by glancing at his tax return and his secretary’s tax return. He has to perform a complicated analysis which is unlikely to be completed in his life time. So they must be talking about tax collection at which point it doesn’t make sense to talk about the burden of the corporate tax on consumers, employees and vendors.
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It’s striking just how closely related inequality and mobility are. And it’s political dynamite. Why? If income inequality in one generation can be linked to unequal opportunity in the next, then income inequality can’t just be dismissed as the politics of envy. My bet is that this chart that will launch a thousand papers, as economists try to sort out just what these linkages are. Whatever the answer, it will transform our thinking about inequality.
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Winship has a bunch of complaints about how the data are constructed — and many are valid. He says that it’s difficult to construct internationally comparable measures of income inequality – that the chart should use inequality from an earlier era, and that only some types of inequality would generate immobility. He also points out that mobility is difficult to measure: the data come from different countries with different researchers using different methods. It’s a standard play from the wonk-fight playbook: throw lots of mud at the data, and hope that this leads people to mistrust the conclusions that follow.
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Here’s the thing: his criticisms actually strengthen the original finding.
Think about it. Imagine how strong the “true” relationship must be if it shows up even when using only rough proxies for the “true” levels of inequality and immobility. In light of Winship’s criticisms, the high correlation in this chart is all the more remarkable. If his gripes are correct, then graph understates the correlation between inequality and mobility.
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professionals like doctors and lawyers are paid slightly better in Singapore than the average of the IPS sample of developed countries. Second, our lower-income workers fare much worse than their counterparts in developed countries.
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In Singapore, a construction worker earns about 9 percent of what a doctor earns, compared to Hong Kong where such a worker earns about 25 percent of what a doctor does.
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Doctors in both cities earn about the same. Likewise, both Singapore and Hong Kong are open to foreign labour. Yet there is this disparity.
If we look at other developed countries, again, Singapore looks like the outlier. Ho said, “First, professionals like doctors and lawyers are paid slightly better in Singapore than the average of the IPS sample of developed countries. Second, our lower-income workers fare much worse than their counterparts in developed countries.
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... When you call lower-income people "losers," you're falsely assuming that we're all racing for the same finish line: material success. But to a large extent, lower-income people are just racing for other finish lines. Leftist outrage over income inequality is therefore deeply misguided. To a large extent, incomes differ because priorities differ. And if poor they don't consider their lack of riches a big deal, why should anyone else?"
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... When you call lower-income people "losers," you're falsely assuming that we're all racing for the same finish line: material success. But to a large extent, lower-income people are just racing for other finish lines. Leftist outrage over income inequality is therefore deeply misguided. To a large extent, incomes differ because priorities differ. And if poor they don't consider their lack of riches a big deal, why should anyone else?"
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Another of the many interesting findings reported:
"Simpler language is better than complex language for making people think you are credible and intelligent."
Here is an interesting paper that answers the question. Some highlights from Table 3 about the top 0.1 percent:
When we examine the effects of offshoring on wages for different knowledge groups, we find that offshoring has the largest positive effect on occupations that require communication and language (premium of +4.4%), followed by social sciences (+3.7%), and maths (+2.7%). The premium for natural sciences and engineering is close to 0. This may seem curious given the policy emphasis on STEM (Science, Technology, Engineering, and Maths) education in many advanced economies, but if science and maths are universal languages, jobs requiring them can be done anywhere with an educated workforce.
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When we examine the effects of offshoring on wages for different knowledge groups, we find that offshoring has the largest positive effect on occupations that require communication and language (premium of +4.4%), followed by social sciences (+3.7%), and maths (+2.7%). The premium for natural sciences and engineering is close to 0. This may seem curious given the policy emphasis on STEM (Science, Technology, Engineering, and Maths) education in many advanced economies, but if science and maths are universal languages, jobs requiring them can be done anywhere with an educated workforce.
One-third of the nation's "1%" identify themselves as Republicans, 41% as independents, and 26% as Democrats. This is a mirror image of the "99%," a third of whom are Democrats, with 39% independents and a quarter Republicans.
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One-third of the nation's "1%" identify themselves as Republicans, 41% as independents, and 26% as Democrats. This is a mirror image of the "99%," a third of whom are Democrats, with 39% independents and a quarter Republicans.
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When the party leanings of independents are taken into account, 57% of the nation's wealthiest adults associate themselves with the Republican Party, compared with 44% of the "99%.
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