303 (8 February 2017)

Welcome to week 303!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.

(2 February 2017): “One Tiny Widget’s Dizzying Journey Shows Just How Critical Nafta Has Become” (https://www.bloomberg.com/graphics/2017-trump-protectionism-alters-supply-chain/)

********This brief article shows the movement of a capacitor from its origins in Asia to the U.S., Mexico, and Canada.  While doing so one can see how NAFTA and U.S. tax laws have influenced the many links in one supply chain.

(2 February 2017): “Full Employment May Be Redefined as Trump Attacks U.S. Benchmark” (https://www.bloomberg.com/news/articles/2017-02-02/full-employment-may-be-redefined-as-trump-attacks-u-s-benchmark)

********As the article points out and as is well known, the most frequently reported measure of unemployment, which is known by labor statistics professionals as U-3, has some problems, in particular, it doesn’t include “discouraged workers.”  There are, in fact, six different unemployment measures—U-1 through U-2—that are regularly created and used by groups such as the U.S. Federal Reserve in making policy.  The article provides a graph of three measures—U-3, U-5, and U-6—from 2008 through 2016, shown that their behavior over time are closely related.  Measures U-1 through U-6 are discussed in two publications:

“BLS introduces new range of alternative unemployment measures” (https://www.bls.gov/opub/mlr/1995/10/art3full.pdf)

“The Unemployment Rate and Beyond: Alternative Measures of Labor Underutilization” (https://www.bls.gov/opub/ils/pdf/opbils67.pdf)

Although not mentioned in the article, the money supply also has alternative measures which, like those for unemployment, are appropriate for different purposes.  You can learn more about those measures—M1 and M2—at: https://www.federalreserve.gov/faqs/money_12845.htm.

(3 February 2017): “The End of Employees” [SR](https://www.wsj.com/articles/the-end-of-employees-1486050443)

——–“Never before have American companies tried so hard to employ so few people.  The outsourcing wave that moved apparel-making jobs to China and call-center operations to India is now just as likely to happen inside companies across the U.S. and in almost every industry. . . . The contractor model is so prevalent that Google parent Alphabet Inc., ranked by Fortune magazine as the best place to work for seven of the past 10 years, has roughly equal numbers of outsourced workers and full-time employees, according to people familiar with the matter. . . . The shift is radically altering what it means to be a company and a worker.  More flexibility for companies to shrink the size of their employee base, pay and benefits means less job security for workers. . . . Some economists say the parallel workforce created by the rise of contracting is helping to fuel income inequality between people who do the same jobs. . . . No one knows how many Americans work as contractors, because they don’t fit neatly into the job categories tracked by government agencies.  Rough estimates by economists range from 3% to 14% of the nation’s workforce, or as many as 20 million people.”  According to staffing executives, “Companies . . . are rapidly increasing the numbers and types of jobs seen as ripe for contracting.  At large firms, 20% to 50% of the total workforce often is outsourced.”

********This is a very informative article that would be worth reading in its entirety—you may be able to if you search on its title.  Steven Berkenfeld, an investment banker, “says companies of all shapes and sizes are increasingly thinking like this: ‘Can I automate it?  If not, can I outsource it?  If not, can I give it to an independent contractor or freelancer?”  According to Berkenfeld, “very few jobs make it through that obstacle course.”  And hiring an employee is “a last resort.”  This is an interesting time to a labor economist or to be a department of Human Resources.

********This is a good place to notice The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism (https://www.amazon.com/Sharing-Economy-Employment-Crowd-Based-Capitalism/dp/0262034573), by Arun Sundararajan.  You can read a review of the book at: http://www.chronicle.com/article/The-Sharing-Economy-Comes-to/238992.  From what I can discern from the review, Sundararajan has a somewhat sunnier view of the changes in the labor market than the one suggested by the article in The Wall Street Journal.

(8 February 2017): “The Big Reason Whites Are Richer Than Blacks in America” (https://www.bloomberg.com/news/articles/2017-02-08/the-big-reason-whites-are-richer-than-blacks-in-america)

——–A new study, “The Asset Value of Whiteness: Understanding the Racial Wealth Gap,” explodes standard explanations and solutions for the wealth gap.

The table of contents says it all:

  • Attending college does not close the racial wealth gap.
  • Raising children in a two-parent household does not close the racial wealth gap.
  • Working full time does not close the racial wealth gap.
  • Spending less does not close the racial wealth gap.

What does account for the racial wealth gap?  This is a question still under investigation.  However, “One powerful factor seems to be that whites are five times as likely as blacks to receive substantial gifts and inheritances, and the sums they get tend to be much larger.”  The wealth advantage of whites’ and the blacks’ disadvantage “gets passed down from generation to generation.”

********The study mentioned in the article can be found at: http://www.demos.org/publication/asset-value-whiteness-understanding-racial-wealth-gap.  (The link in the Bloomberg article that was supposed to take the reader to it did not work.  This one does.)  My understanding of the article is that legal and political factors—the invisible foot—are the primary factors perpetuating the racial wealth gap.

(8 February 2017): “’A Conservative Climate Solution’: Republican Group Calls for Carbon Tax” (https://www.nytimes.com/2017/02/07/science/a-conservative-climate-solution-republican-group-calls-for-carbon-tax.html)

——–“A group of Republican elder statesmen is calling for a tax on carbon emissions to fight climate change.  The group, led by former Secretary of State James A. Baker III, with former Secretary of State George P. Shultz and Henry M. Paulson Jr., a former secretary of the Treasury, says that taxing carbon pollution produced by burning fossils fuels is ‘a conservative climate solution’ based on free-market principles.  Mr. Baker is scheduled to meet on Wednesday with White House officials, including Vice President Mike Pence, Jared Kushner, the senior adviser to the president, and Gary D. Cohn, director of the National Economic Council, as well as Ivanka Trump.  In an interview, Mr. Baker said that the plan followed classic conservative principles of free-market solutions and small government.”

********The proposal for the carbon tax, as well as additional related items, is a product of the Climate Leadership Council, about which you can learn more at: https://www.clcouncil.org/about-us/.  The proposal is contained in “The Conservative Case For Carbon Dividends” (https://www.clcouncil.org/wp-content/uploads/2017/02/TheConservativeCaseforCarbonDividends.pdf).  It is an impressive list of contributors, including economists Martin Feldstein and N. Gregory Mankiw among others.  This eight-page document lays out “The Four Pillars of a Carbon Dividends Plan,” which are worth looking at and reflecting upon.  This document is connected to a companion document of twenty-pages, “Unlocking the Climate Puzzle” (https://www.clcouncil.org/wp-content/uploads/2017/02/Unlocking_The_Climate_Puzzle.pdf), authored by Ted Halstead.  Authors of “The Conservative Case” document are spreading the word in opinion pieces running in national newspapers, e.g., The New York Times (https://www.nytimes.com/2017/02/08/opinion/a-conservative-case-for-climate-action.html) and The Wall Street Journal [SR](https://www.wsj.com/articles/a-conservative-answer-to-climate-change-1486512334).

May you have a good week!

Bruce

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