Source: We Can’t Blame a Few Rich People for Global Poverty – The New York Times.
@Oxfam it is 0.7%, not 50% @OxfamNZ
19 Jan 2016 1 Comment
in applied welfare economics, development economics, growth miracles, politics - New Zealand, politics - USA, poverty and inequality
Collective bargaining coverage across the OECD, 1990 and 2011
15 Jan 2016 Leave a comment
in economic history, labour economics, poverty and inequality, unions Tags: collective bargaining coverage, top 1%, union membership, union power, union wage premium
Despite all the hullabaloo, collective bargaining agreement coverage is not declined by that much outside of the English-speaking countries. Outside of the USA, the top 1% are very lazy so they have not benefited from this decline of union power. Within the USA, so few people are covered by collective bargaining agreements for so long that it would not figure in the rising top incomes over the last 30 or more years.
Source: Economic Policy Reforms 2015: Going for Growth – © OECD 2015 and OECD Employment Outlook 2002.
As for New Zealand, the main difference between 70% collective bargaining agreement coverage in 1990 and less than 20% collective bargaining coverage in 2011 is real wage growth returned to New Zealand in the early 1990s after 20 years of wage stagnation. The major economic event of the time was the passage of the Employment Contracts Act.
@garethmorgannz are the poor are just like everyone else except that they have less money?
14 Jan 2016 Leave a comment
in applied welfare economics, economics of education, politics - New Zealand, politics - USA, poverty and inequality, welfare reform
There is a large literature on what money can buy in terms of improved child outcomes. Central to the left-wing view is the poorer are just like everyone else but they have less money. Susan Mayer, a proud registered Democrat all her life, kick-started the literature challenging this with her book in 1997.
More money does help the children of poor families but the effect is considerably less–and more complicated–than is generally thought because as Mayer says ‘once children’s basic material needs are met, characteristics of their parents become more important to how they turn out than anything additional money can buy.
Doubling the income of poor families would lift most children above the poverty line, it would have virtually no effect on their test scores and only a slight effect on social behaviour. Among her findings, which have largely survive the test of time, are:
- Higher parental income has little impact on reading and mathematics test scores.
- Higher income increases the number of years that children attend school by only one-fifth of a year.
- Higher income does not reduce the amount of time sons are idle as young adults.
- Higher income reduces the probability of daughters growing up to be single mothers by 8 to 20 percent.
Mayer found that as parents have more money to spend, they usually spend the extra money on food, especially food eaten in restaurants; larger homes; and on more automobiles. As a result, children are likely to be better housed and better fed, but not necessarily better educated or better prepared for high-income jobs. Mayer said that her findings do not endorse massive cuts in welfare:
My results do not show that we can cut income support programs with impunity…Indeed, they suggest that income support programs have been relatively successful in maintaining the material living standard of many poor children.
Mayer found that non-monetary factors play a bigger role than previously thought in determining how children overcome disadvantage as she explains. Parent-child interactions appear to be important for children’s success, but the study shows little evidence that a parent’s income has a large influence on parenting practices.
Mayer said that if money alone were responsible for overcoming such problems as unwed pregnancy, low educational achievement and male idleness, states with higher welfare benefits could expect to see reductions in these problems. In reality
once we control all relevant state characteristics, the apparent effect of increasing Aid to Families with Dependent Children benefits is very small.
Social economics has been here before. In the 1960s, the Coleman Report rather than finding that investing in schools improved child outcomes found that most variation between child outcomes depended on family backgrounds. When we talking about schools not matter in too much we are talking about average bad schools and average good school not American inner-city schools into war zones.
Source: Savings, Genes, and Fade-Out, Bryan Caplan | EconLog | Library of Economics and Liberty.
Behavioural genetics has been a bit of a blow to those that think greater parental investment can raise child outcomes as Bryan Caplan has explained:
Economists like Nobel laureate Gary Becker have been studying the family for decades. Like most modern parents, economists usually take it for granted that “parental investment” has large, lasting effects on adult outcomes.
And yet adoption and twin researchers find surprisingly little evidence for this this assumption(link is external)! With a few notable exceptions, the measured effect of upbringing on adult outcomes is small to zero. Adoptees barely resemble their adopting families, identical twins are much more similar than fraternal twins, and identical twins raised apart are often as similar as identical twins raised together. Almost all traits run in families, but the overarching reason is heredity.
Caplan notes that while it is extremely difficult for parental investments to change the adult outcomes of his children, it is well within his power to give his children a happy childhood.
1996 US welfare reforms & single mother employment rates @garethmorgannz @geoffsimmonz
13 Jan 2016 Leave a comment
in gender, labour economics, labour supply, politics - New Zealand, politics - USA, poverty and inequality, welfare reform Tags: 1996 US welfare reforms, female labour force participation, maternal labour force participation, single mothers, single parents, social insurance, welfare state
Source: Ron Haskins (2015).
Poverty Rates by Mothers’ Marital Status, 1987 to 2013
13 Jan 2016 Leave a comment
in applied welfare economics, economic history, labour economics, labour supply, politics - USA, poverty and inequality, welfare reform Tags: child poverty, family poverty, single mothers, single parents, social insurance, welfare state
Source: Congressional Research Service.https://www.fas.org/sgp/crs/misc/R41917.pdf
A curious @povertymonitor based child poverty infographic
12 Jan 2016 2 Comments
in applied welfare economics, politics - New Zealand, poverty and inequality
@povertymonitor confirms success of neoliberalism in restoring real wages growth
12 Jan 2016 Leave a comment
in applied welfare economics, economic history, politics - New Zealand, poverty and inequality
After two lost decades from 1974 where there was real wage stagnation and next to no real GDP growth, following the Mother of All Budgets in 1991 under Ruth Richardson and the passage of the Employment Contracts Act in the same year, real wages growth returned after a hiatus of 20 years. These 20 years of real wage stagnation were the good old days if the Leftover Left is to be believed.
Source: Child Poverty Monitor: 2015 Technical Report, figure 39.
Dave Armstrong food banks existed in NZ since the 19th century
11 Jan 2016 Leave a comment
in economic history, politics - New Zealand, poverty and inequality
Source: Donna Wynd, Hard to Swallow Foodbank Use in New Zealand (2005).
David Armstrong claimed incorrectly that there have been no food banks in New Zealand until recently:
That’s how it used to be here not so long ago, when foodbanks didn’t exist and the number of homeless was tiny. I remember when we had few cases of “poverty” diseases such as rheumatic fever or rickets.
What else explains the increased popularity of food banks, which have been long-standing in New Zealand, it is not falling wages.
The main economic development over the last 25 years is the return of real wage growth after decades of wage stagnation in the boys own good old days of David Armstrong.
Source: Low Wage Economy | New Zealand Council of Trade Unions – Te Kauae Kaimahi.
As for the number of homeless being tiny in the good old days of New Zealand, a New Zealand Parliamentary Library 2014 paper on homeless started its historical narrative in 1850 and spent a lot of time discussing housing deprivation in the early and mid-20th century:
A 1936 national survey found nearly a third of the total urban housing stock was unsatisfactory and 15% of this only fit for demolition. [5] Māori in particular experienced poor housing conditions. The first Labour Government loaned money for private house purchases and built state housing to rent.
During the 1950s, the National Government moved to reduce the waiting list for state housing and promoted home ownership, but lengthy waits for some people were reported. Likewise, concern was expressed over severe overcrowding, especially among Māori. By the late 1950s, Wellington’s housing needs were identified as ‘particularly acute.
In the 1960s voluntary organisations recorded a gradual increase in some groups experiencing housing difficulties. The Christchurch Methodist Church night shelter found that their main users were employed people who could not afford other accommodation, unmarried women with children, and those leaving homes because of domestic violence also increasingly sought shelter
Not even a self-described liberal elitist of the left can be forgiven for forgetting some of the key achievements of the first Labour government in social housing. The idea was to improve the quality of New Zealand housing for the poor.
Source: The first state house – State housing | NZHistory, New Zealand history online.
In common with Max Rashbrooke, David Armstrong’s recollection of his boys own childhood does not include Maori as they drifted to the city. Prior to the middle of the 20th century about 85% of Maori lived in rural areas, often lacking electricity, running water and living on dirt floors as the Encyclopaedia of New Zealand explains:
Attracted by work opportunities and the ‘bright lights’ of city life, rural Māori began to move to Auckland and Wellington in the 1920s. However, many faced problems finding accommodation. The reputation Māori had among Pākehā for overcrowding and taking poor care of their homes meant few landlords were prepared to have them as tenants. As attendee James Rukutoki told a Māori leaders conference in 1939, ‘the only dwellings open to the Maori are the ramshackle discards of the Pākehā’.
What does the poverty rate tell us? @keith_ng @EricCrampton @geoffsimmonz @apdrmabsc @bryce_edwards
11 Jan 2016 Leave a comment
in applied welfare economics, politics - New Zealand, poverty and inequality
Keith Ng stumbled onto an interesting point in a Twitter feud yesterday before he muted me about what is the poverty rate for. Are we interested in the poverty rate before government transfers and other social assistance or after them? Why?
If you are making the case for more assistance to the poor, the correct poverty rate measure is after the existing government assistance. Interestingly, most of those making the case for greater assistance to the poor use the before government transfer measures of poverty rates.
The reason why the correct measure is after government assistance is you are attempting to measure whether the assistance to date has provided people with an adequate standard of living. The before government assistance poverty rate provides no insight into that question.
The recent calculation by the Treasury of inequality based on income and consumption illustrates this. Most people are concerned about what people have to spend rather than how much they earn when thinking about topping them up with government social assistance.
Source: Inequality in New Zealand 1983/84 to 2013/14 (WP 15/06) — The Treasury – New Zealand
As the above chart shows, consumption inequality in New Zealand has not changed much since 1984 while income inequality has. Which is more important how much people have to spend or how much they are? Growing inequality is not a reason for more government assistance to the poor in New Zealand because it simply has not got worse for 30 years.
The reason that the before government assistance poverty rate is used is this rate is a relative measure that does not fall by that much. It therefore helps dramatise the politics of poverty and perhaps strengthen your case in the eyes of low information voters.
The better guide is the poverty rate after government assistance because that tells you how much extra you really need to top up the incomes of the poor to ensure they have an adequate minimum standard of living. The before government assistance poverty rate provides no insight into the success of social insurance and the welfare state regarding the adequacy of income support for the poor.
The poverty rate is not a reliable policy statistic @HelenKellyUnion @apdrmabsc @keith_ng
10 Jan 2016 Leave a comment
in applied welfare economics, economic history, politics - New Zealand, politics - USA, poverty and inequality
The official poverty rate in the USA missed poverty falling to near zero by the eve of the Global Financial Crisis in 2007 as shown in the chart below. That is no small oversight. It calls into question whether the official poverty rate which is based on a percentage of the median income is a useful guide to the magnitude of social problems before us.
Source: Meyer and Sullivan (2012), p. 153.
Meyer and Sullivan calculated a consumption based measure of poverty and found that the poverty rate fell much faster than previously single digits.
People worry about poor not have enough, not how much income they have before taxes and social insurance. The official poverty rate is before tax and social insurance and therefore before how much the poor actually have to get by with after receiving social assistance of all types and sources.
Interestingly, the divergence between consumption-based poverty and income-based poverty started with the election of Reagan and picked up the US federal welfare reforms in 1996. The number of children in poverty in deep poverty fell immediately after those 1996 US welfare reforms. There is a lesson in that for New Zealand.
It is widely agreed that the official poverty rate is flawed. Measuring poverty as a percentage of median income, usually 60% of the median income, means that poverty may not fall despite incomes doubling every generation and more.
Indeed, increases in the median income can increase poverty without anyone being poorer. This is because the gap between the median income earners and the poor increased such as the New Zealand in 2014 without any of the poor experiencing a fall in income and social support.
The reason why the median is pulling away from the bottom – the reason why income distribution is fanning out – is more people going to university and securing the associated wage premium and the greater rewards for talent in a globalised world.
The forces behind greater educational attainment and the globalisation of markets benefit all and in particular those of bottom of the income distribution through a more prosperous, dynamic, innovative society.
Is @fightfor15 the best answer?
10 Jan 2016 Leave a comment
in labour economics, labour supply, minimum wage, poverty and inequality, unemployment Tags: living wage, rational irrationality
The rise of the Canadian working super-rich – composition of top 0.1% incomes since 1946
09 Jan 2016 Leave a comment
in applied welfare economics, economic history, human capital, labour economics, poverty and inequality Tags: Canada, superstars, superstore wages, top 0.1%, top incomes
Source: The World Wealth and Income Database.
Did the rich get richer under Rogernomics? New Zealand top income shares since 1921
09 Jan 2016 Leave a comment
in applied welfare economics, economic history, human capital, labour economics, politics - New Zealand, poverty and inequality Tags: Leftover Left, superstar wages, superstars, top incomes
Apart from a bump in the late 80s, the top income earners in New Zealand really are not doing much better than they were in the 1950s or 1920s. The rich are not getting richer in New Zealand. They are just holding their own.
Source: The World Wealth and Income Database.
The rise of the Canadian working rich – composition of top 1% incomes since 1946
08 Jan 2016 Leave a comment
in applied welfare economics, economic history, human capital, labour economics, poverty and inequality Tags: Canada, superstar wages, superstars, top 1%, working rich
Source: The World Wealth and Income Database.
The rise of the working rich in Australia – top income compositions since 1954
08 Jan 2016 Leave a comment
in economic history, human capital, labour economics, politics - Australia, poverty and inequality Tags: Australia, superstar wages, superstars, top incomes, working rich
Over the course of the post-war period top incomes in Australia turned into top wage earners. It is unfortunate that information is not available on the extent to which business incomes make up the balance of top incomes as distinct from dividend incomes.
Source: The World Wealth and Income Database.
Utopia, you are standing in it! 
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