[y66]

From Paul Krugman's 3/10 NYT column:

Quote

So does reducing inequality through redistribution hurt economic growth? Not according to two landmark studies by economists at the International Monetary Fund, which is hardly a leftist organization. The first study looked at the historical relationship between inequality and growth, and found that nations with relatively low income inequality do better at achieving sustained economic growth as opposed to occasional “spurts.” The second, released last month, looked directly at the effect of income redistribution, and found that “redistribution appears generally benign in terms of its impact on growth.”

Nobody is proposing that we try to be Cuba, but moving American policies part of the way toward European norms would probably increase, not reduce, economic efficiency

[y66]

From Income inequality leads to lower growth (Feb 26):

Quote

(Reuters) - Income inequality can lead to slower or less sustainable economic growth, while redistribution of income, when measured, does not hurt and can even help an economy, IMF staff found in a research study released on Wednesday.

Although the study by International Monetary Fund economists does not reflect the Fund's official position, it is another sign of a shift in its thinking about income disparity.

"It would still be a mistake to focus on growth and let inequality take care of itself, not only because inequality may be ethically undesirable but also because the resulting growth may be low and unsustainable," according to the study.

The IMF analyzes the economies of each of its 188 member countries and offers advice on government budget and monetary policies. It is also a lender of last resort, tasked with supporting global financial stability.

It has traditionally advised countries to promote growth and reduce debt, but has not explicitly focused on income inequalities. But in the past year, IMF Managing Director Christine Lagarde has said that creating economic stability is impossible without also addressing inequality.

Oxfam, the international development group, has long argued that organizations like the IMF need to address rising gaps between the rich and poor, and stop encouraging low public spending.

"In the bad old days, the IMF asked governments to cut public spending and taxes," said Nicolas Mombrial, the head of Oxfam's Washington office. "We hope this research and Christine Lagarde's recent statements are a sign that they are changing their tune."

Economists are still divided about the relationship between growth and income inequality, which has spiked around the world as economies struggle in the wake of the 2007-2009 financial crisis.

Some have also blamed rising income inequality for contributing to the crisis in the first place, by encouraging more borrowing by people who wanted to maintain their standards of living. See Special Report: reut.rs/1frreDJ

Jonathan Ostry and Andrew Berg, two of the authors of the IMF paper, also researched the link between income inequality and growth in 2011.

At the time, Ostry said the response was that income redistribution rather than inequality was responsible for hurting growth: some argued that inequality prompted governments to transfer money to the poor, which reduced incentives to work.

Their follow-up paper on Wednesday showed redistribution was not to blame.

"We find that inequality is bad for growth ... in and of itself," Ostry told reporters on Wednesday. "And we can say that redistribution by itself doesn't seem to be bad for growth, unless it's very large."

They said there was evidence that extremely high taxes or transfers to the poor, such as which occurs in some European countries, could hurt growth. But they found that redistribution also helped growth by reducing inequality.

[ArtK78]

This all makes perfect sense, as poorer people spend a much greater percentage of their earnings on consumption rather than investment.

[Winstonm]

ArtK78, on 2014-March-10, 08:31, said:

This all makes perfect sense, as poorer people spend a much greater percentage of their earnings on consumption rather than investment.

I agree, and it is not so difficult to follow that if an additional 10% is removed from savings (i.e., wealth) and distributed to those who consume 100% of income then demand grows. Growth in demand is followed by a response from suppliers.

[kenberg]

Growing up, I was taught, largely as unquestioned faith, that the fundamental reason for the growth in U.S. prosperity was the success of the labor movement. The reasons were the obvious ones expressed above and elsewhere. If a large portion of the population has a satisfactory middle class life then there will be a market for goods. I have never changed my mind about this. Somehow everything fell apart.

I did a little experiment today. I had a number of things to do, interacting with various people as they performed their jobs. I
ll give my first example, and then summarize. I had a little mishap with the car last week (a post ran into my bumper) and it needs to be fixed. I called a place on Friday and talked to a very pleasant woman who made an appointment for me at 10:00 to get an estimate. I showed up a little early and was looking for the correct door when one of the workers called out that the office was in the building over to my right. I went in and someone looked up immediately and asked if I was the guy with the Accord. Yep. He siad someone would be with me in a minute and so it was. I was out of there by 10:15. I'm going to use them to fix the car.

The experiment is that I tried to remember in each encounter that I had during the day whether or not the person I was talking to needed a college degree for the job that they had. The final tally was about 12 to exactly 0. Maybe some of these guys had a college degree, maybe not, I could not care less.

We have screwed this up. I understand why many employers ask for a college degree. Partly this is because the high schools, many of them, suck. And then there is the idea that completing college shows the ability to complete something. So I get it, at least sort of. But it is a big change in American society and it has other implications beyond jobs. We have now defined adolescence to go on until well into the 20s. Sure, there is science that says brains are not fully developed by 18, and maybe not be 75 either, but I don't think that it is healthy to treat a 20 year old as if he can hardly be expected to think for himself.

Anyway, I welcome serious plans to help those in need become successful. To as large an extent as possible, I hope we can use help to ease more people, or their children, into self-sufficiency.

[y66]

We most definitely need to change the way we think about all this. We have totally screwed this up.

These guys have some good ideas:

Henry Street Settlement - New York, New York

Project Quest - San Antonio, Texas

Focus: HOPE's career training programs - Detroit, Michigan

So do others mentioned here: Where Biden Should Look for Job Training Ideas

[mike777]

"Growing up, I was taught, largely as unquestioned faith, that the fundamental reason for the growth in U.S. prosperity was the success of the labor movement. The reasons were the obvious ones expressed above and elsewhere. If a large portion of the population has a satisfactory middle class life then there will be a market for goods. I have never changed my mind about this. Somehow everything fell apart"


I think Ken raises a very important point...Most were taught that success of the labor movement was the fundamental reason for growth and prosperity in the usa.

If we can test this theory vs say innovation or productivity or other factors that would be helpful.

Some attribution analysis here would be helpful rather than just belief.
-------------


Fwiw I believe that a culture of innovation ...one that allows failure to lead to second chances rather than deep shame is the most important factor.

I use Japan as just one cultural example where failure leads to deep shame and inhibits innovation.

There are other examples where protecting the status quo/interests inhibits innovation.

All of which leads to stagnation.

I am pro Union...Unions drove innovation in many ways.
Today the downside seems to be they are often about protecting the status quo/interests which inhibits innovation rather than being a driver of innovation.

[kenberg]

I didn't mean to be downplaying innovation.or other engines of growth.

As I think over this thread, I think I see where I differ from some others. Most all of us believe in help for those in need of help. The difference, and it may be no more than ways of speaking, seems to center around long term goals and hopes. I expect and hope that most adults can eventually be self-supporting. Of course some cannot, I recognize that, but most can. So as we think of help for the needy, I think in terms of how this will help them to need less help in the future. The labor movement saw to it that a person (ok, given the times it was mostly a male) could get paid decently for doing something useful. This is fundamentally different from deciding that a good sized segment of society will never be able to do anything useful and so we will just support them. No doubt it will sometimes be the kids who will succeed instead of the parents, but forward movement is to be a major goal in my view of help.

But yes, I would be interested in knowing if my view of the tole of the labor movement in the development of the American economy is accepted by economic historians. I have pretty much always regarded as obvious to anyone who pays any attention at all.

Added: It's hardly news that the Democratic Party does not have the support of the working class to the same degree that it once did. It would not be surprising to find that a truck driver sees the purpose of help pretty much as I do, and thinks that the Dems see it differently. To the extent that this is a mis-perception they may want to work on this, and to the extent it is real they may want to re-think it a bit.

[y66]

From a 1991 review of Which Side Are You On? Trying to Be for Labor When It's Flat on Its Back by Thomas Geoghegan:

Quote

Although it sounds nearly impossible to write a charming book about such a complex subject as the diminished role of unions today compared with what they did in the New Deal years, Thomas Geoghegan succeeds in doing so by telling the story through his own life as a labor lawyer. His account of how he remains in the boondocks of trade unionism while most of his Harvard Law School classmates practice in more lucrative but duller fields makes for lively reading. Mr. Geoghegan, a product of the 1960's, heeded a different drummer: his own altruistic instincts.

Part autobiography, part evidence of how Federal laws tilt against unions and part history of modern labor relations, "Which Side Are You On?" seldom reads like a tract. While the author's own feelings are plainly summed up in his book's subtitle, he is fairly evenhanded about distributing blame for the plight of unions. With noble exceptions, the leaders of some of the big unions as well as big companies come off as unconcerned about the lives of their members and their work force. As a consequence, Mr. Geoghegan finds that business and the economy suffer.

The Federal Government receives the lowest rating in "Which Side Are You On?" From his perspective as a Chicago lawyer who has sat in on many negotiations to save jobs and pension rights, Mr. Geoghegan dates the decline of union power to the passage of the Taft-Hartley Act in 1947 over President Harry S. Truman's veto. When people ask him why labor can't organize the way it did in the 1930's, he replies: "Everything we did then is now illegal." That law led to "union busting," he says, a recent example being President Ronald Reagan's decision to dismiss 12,000 air traffic controllers for disobeying his order not to strike.

...Citing one of his own tough cases, Mr. Geoghegan says he spent seven years during the Reagan Presidency representing 2,500 former employees who sued International Harvester for the benefits they lost when Harvester "transferred title to a dummy corporation." A succession of such actions left no one to pay the pensions. "The deal was so mean, so vile, that even the investment bankers gagged," he writes. "Lehman Brothers, the investment banking firm handling the sale, went to Harvester and objected on simple moral grounds." The resolution of the problem took years, but eventually the workers received sharply reduced pensions.

[y66]

From Steven Hill's February 2013 article in The Atlantic:

Quote

The new liberal vision of a competitive economy built around a resurgent manufacturing sector and an educated middle class seems to ape what Germany does best. But how much do we really understand what makes the German economy a world-class leader?

It's true that, by U.S. standards, Germany has a model system for technical training of workers. The Land of Bismarck has fed its manufacturing machine with a steady supply of technicians, engineers and skilled workers through a superb apparatus of vocational training and technical apprenticeships. Companies work closely with regional technical schools, sometimes sponsoring programs to prepare the graduates so they are immediately job-ready.

But Germany's vocational training isn't top of the class by European standards. That prize goes to Denmark. Over four percent of Danish gross domestic product is spent on job training and support -- about the same percentage the U.S. spends on its military budget while allotting a mere 0.7 percent to job retraining and support. And Danes have job placement down to a quasi-science. Experts prepare what is known as a "bottleneck analysis," using pollsters to survey employers on what jobs they will need in coming years. The feedback is then used to identify the next labor shortages and to pick the correct training courses for individuals. One Danish jobs analyst said, "In our system, we can make supply and demand match," an impressive boast that shows a proactive government can help a flexible labor market.

THE SECRET SAUCE IS S.M.E.

Beyond vocational training, a huge factor in Germany's manufacturing and export success lies in its vibrant mittelstand -- those small and medium-size enterprises (SMEs) that form the backbone of the economy. Germany has a cornucopia of Fortune 500 companies that are manufacturing leaders -- global brand names like BMW, Siemens, ThyssenKrupp, Volkswagen, Daimler and BASF -- but what really sets Germany apart is its beehive of small and medium-size businesses.

About 99 percent of all German companies are SMEs, which are enterprises with annual sales of below EUR 50 million and a payroll with fewer than 500 workers. And around two-thirds of all German workers are employed in this sector. While that's the same as the EU average, it's higher than the United Kingdom (60% SMEs) and much higher than the U.S. (about 50%). While America's policy makers pay lip service to sound bites like "small business is the backbone of the American economy," Germany actually follows through with smart policy. The results speak for themselves.

A beehive of small and medium-size businesses? Didn't someone say recently in the water cooler that we could use another Teddy Roosevelt?

[Winstonm]

y66, on 2014-March-11, 08:48, said:

From Steven Hill's February 2013 article in The Atlantic:


A beehive of small and medium-size businesses? Didn't someone say recently in the water cooler that we could use another Teddy Roosevelt?

This beehive of small and medium-size business is antithema to the Reaganistas who only mouth Adam Smith while working toward eliminating competition and labor resistance.

[Winstonm]

This quote from a guy named Brian Buetler summarizes well why the right wing has lost its way: the cart (ideology) has been placed firmly in front of the horse (facts).

Quote

If you’re sure your ideas are correct and confident your solutions are the right ones you’ve already erected a significant barrier to self-examination. And when admitting error carries enormous financial, personal and ideological risk, it feels easier not to check. You’re shocked when your candidate loses, because none of your friends voted for the other guy. And you just pass along stories they tell you about the soul-crushing nature of welfare, or the horrors of the Affordable Care Act, without bothering to apply a smell test.

The latest example is Paul Ryan, who blindly passed along as true a contrived welfare story that was later proven to be faked.

[billw55]

Winstonm, on 2014-March-11, 09:08, said:

The latest example is Paul Ryan, who blindly passed along as true a contrived welfare story that was later proven to be faked.

Or who made up his marathon time.

[barmar]

kenberg, on 2014-March-10, 17:06, said:

We have screwed this up. I understand why many employers ask for a college degree. Partly this is because the high schools, many of them, suck. And then there is the idea that completing college shows the ability to complete something. So I get it, at least sort of. But it is a big change in American society and it has other implications beyond jobs. We have now defined adolescence to go on until well into the 20s. Sure, there is science that says brains are not fully developed by 18, and maybe not be 75 either, but I don't think that it is healthy to treat a 20 year old as if he can hardly be expected to think for himself.

Those are part of it, but there's more.

If you have 100 applicants for 10 jobs, interviewing all 100 of them is hard work. So one way to simplify the process is to first winnow down the applicants using objective criteria, and requiring a college degree is a simple one. While it's true that you might occasionally miss out on hiring the next Bill Gates, the chance of that is slim. The top 10 of the college graduates will usually be about as good as the top 10 of all the applicants.

I worked for a high tech company many years ago, and they required college degrees for everyone, even receptionists and administrative assitants (aka secretaries). Not because it takes a college education to answer the phones, but because they considered these entry-level jobs -- it was quite common for people to be promoted out of these jobs. I remember a woman who was hired as our team's administrative assistant, then she became a system administrator, and eventually the team leader among the admins.

[kenberg]

Winstonm, on 2014-March-11, 09:08, said:

The latest example is Paul Ryan, who blindly passed along as true a contrived welfare story that was later proven to be faked.

My take on the Paul Ryan story about a kid whoo didn't want a free lunch but rather a lunch in a brown bag by his mother, showing that she loved him:

1. No kid talks like that. The story did not need to be checked, anyone who considered it even possible that a kid said that must never have been a kid, had a kid, or known a kid.

2. If any kid ever said that, he should be told that his mother is not his servant. If I have ever said such a thing to my mother, she would have said something along the lines of "Here's a bag, you know where the bread box and the refrigerator are, if you want to discuss whether you are loved we can do that after you get home from school." Actually my mother would not have put it exactly that way, but I had to get this past the forum censors so I cleaned it up a bit.

[kenberg]

barmar, on 2014-March-11, 11:52, said:

Those are part of it, but there's more.

If you have 100 applicants for 10 jobs, interviewing all 100 of them is hard work. So one way to simplify the process is to first winnow down the applicants using objective criteria, and requiring a college degree is a simple one. While it's true that you might occasionally miss out on hiring the next Bill Gates, the chance of that is slim. The top 10 of the college graduates will usually be about as good as the top 10 of all the applicants.

I worked for a high tech company many years ago, and they required college degrees for everyone, even receptionists and administrative assitants (aka secretaries). Not because it takes a college education to answer the phones, but because they considered these entry-level jobs -- it was quite common for people to be promoted out of these jobs. I remember a woman who was hired as our team's administrative assistant, then she became a system administrator, and eventually the team leader among the admins.

Indeed. Right after graduation I got a job wiring computers for Control Data. They were very realistic. The guy explained that the job was very boring and they would fully understand if i quit, but since I needed a job and they needed their computers wired up maybe I would take it as a summer job. I was starting grad school in the fall.

I mentioned earlier that my summer was weird. Possibly you will find it amusing.


I had been wiring the computers for a couple of weeks when I got a long distance call offering me at job with NASA at the just opening Gddard location in Greenbelt Maryland. I accepted on the spot, arranged to get out of my lease and quit at CD. Just before we left (I had gotten married in June) I got a postcard from the University saying that I wasn't graduating because I had an incomplete in Numerical Analysis. First I had heard of this. So I went over to the campus and, after a bit of a search, spotted the Prof. on a leisurely stroll about the campus. Icharged up to him and siad "Dr. X (not his real name) I have been running all over looking for you!" "You shouldn't run, it's bad for your heart". "Sure. Anyway, you gave me an incomplete" . "Yes, I lost your final". "You lost my final?" " Yes, but I found it again, it's ok". "Have you turned in the change of grade?" "No, but I will". "Would you like me to take it over for you?". "No, I'll do it"

So off I go to Greenbelt and NASA. They provisionally took my word for it that my non-graduation was for the reason above, but then after a couple of weeks I realized that they were thinking i had come out for a permanent job, I thought that they understood it was a summer job. Oops. Well, nothing to do but tell them, so I did. I modestly claim that by this time it was clear that I was the best worker of the several guys that started all at the same time so they lived with this but still there was the issue of my graduation. I had been in touch with friends and with Shirley, the department's super secretary, about this and she had been pushing to get the change of grade done. Around early August I got this letter from Shirley informing me that Professor X had died, and that he had not yet changed my grade. She explained that arrangements had been made for me to take a make-up final to be administered by Professor Y, a notoriously hard grader, and I could do this when I came back to start my graduate work. I wrote back to Shirley saying that I was very sorry to hear about X's death, but I really liked him and if possible I would like to contribute for flowers. I got a letter back by return mail in which Shirley said that she was sorry to have misled me, Professor X was "very much alive" and he had finally changed my grade. I still had the previous letter so I got it out and yes, it said that X had died. I re-read the latest letter where Shirley apologized for misleading me. Hmmm.


Sometime after I got back, maybe November or so, I was talking about this with a friend and he was in uncontrollable laughter. It turned out that he and another friend had broken into the math department office, stolen some official stationery, and drafted the letter announcing the death of X.

By next summer my wife was pregnant and I got a job locally at Minneapolis Honeywell.

Starting out can have its rough spots.

[blackshoe]

barmar, on 2014-March-11, 11:52, said:

If you have 100 applicants for 10 jobs, interviewing all 100 of them is hard work.

Having more people to interview doesn't make the job harder, it makes it more time consuming. As to whether a college degree requirement is useful to narrow down the field, I suppose it is - but I also suppose it's not always an appropriate criterion. It would not make sense, for example, to require a college degree for mail carriers, or garbage collectors, or truck drivers, or construction workers, or any similar job.

There are other ways. I had a friend in high school who wanted to work in the merchant marine. Problem: he didn't have a union card. How could he get a union card? Work in the merchant marine. Good luck with that. Turned out it didn't matter, because he had a different kind of luck - his father was good friends with the local union's doctor. Surprise! You're now a member of the union! Problem solved. The point here is that 'you don't have a union card' was the way "too many applicants" were winnowed down. Note that, left alone, the ship owner probably wouldn't care much about the union card, as long as the applicant seemed capable of doing the job. Thing is, he's not left alone - and unions can get really nasty if they think you've crossed them.

[mike777]

blackshoe, on 2014-March-12, 11:24, said:

Having more people to interview doesn't make the job harder, it makes it more time consuming. As to whether a college degree requirement is useful to narrow down the field, I suppose it is - but I also suppose it's not always an appropriate criterion. It would not make sense, for example, to require a college degree for mail carriers, or garbage collectors, or truck drivers, or construction workers, or any similar job.

There are other ways. I had a friend in high school who wanted to work in the merchant marine. Problem: he didn't have a union card. How could he get a union card? Work in the merchant marine. Good luck with that. Turned out it didn't matter, because he had a different kind of luck - his father was good friends with the local union's doctor. Surprise! You're now a member of the union! Problem solved. The point here is that 'you don't have a union card' was the way "too many applicants" were winnowed down. Note that, left alone, the ship owner probably wouldn't care much about the union card, as long as the applicant seemed capable of doing the job. Thing is, he's not left alone - and unions can get really nasty if they think you've crossed them.

btw automation is coming to the merchant marines. It may still be awhile but the trend is toward computers/robots on ships not people not even the captain.

[blackshoe]

mike777, on 2014-March-12, 18:40, said:

btw automation is coming to the merchant marines. It may still be awhile but the trend is toward computers/robots on ships not people not even the captain.

And what do you think will happen the first time a fully automated ship has an accident? Think Exxon Valdez.

[barmar]

blackshoe, on 2014-March-12, 11:24, said:

Having more people to interview doesn't make the job harder, it makes it more time consuming.

Spending more time on something is harder than spending less time on it. And if you have a deadline, it may make things more complicated, or require devoting more resources, at the cost of other things they might be needed for.