Wealth distribution in Australia

Net Wealth

Source: OECD. More here.

Wealth distribution is typically more unequal than income distribution – as inequality is cumulatively causative to some extent. I was alerted to the relatively equitable distribution of housing wealth by a recent Henry Ergas column which contains the amazing statement that there is ”very little difference in the housing wealth holdings of the bottom and middle-income quintiles for those aged 65 and over” which Henry defends in response to an email of mine to him seeking clarification that the words mean what I think they mean. They do. He says it’s true and I have no reason to doubt him. If so it’s an achievement we should celebrate and the way our cities are going it’s likely to be becoming less and less true with time. Be that as it may it corroborates the diagram above. Look at the US and Australia when comparing average and median wealth – chalk and cheese.

Sadly I would expect our better performance – close to or at best in world if you like your inequality in moderation – to fade, not just because of our cities but also because of our savings policies. Who was it that set up a flat tax on what is now $2 trillion of super savings? That would be the ALP and the union movement.

The HALE Index Q1 (Jan to Mar). 2015

Summary of the March Quarter

HALE Q1 2015

Above: NNI, GDP and HALE ($ bil) from Jun 2005 to the present (Q1 20015). The changes during the most recent quarter are contained inside the two vertical red lines at the right hand margin of the figure.

The HALE has recorded a reduction in wellbeing for the first part of 2015. In the March quarter it contracted by 0.4% which is against the long-term rising trend.[1] This is despite GDP recording above average growth this quarter. However, NNI was weaker than long-term trend as a result of continuing terms of trade declines.

The primary cause of the contraction in the HALE, despite the strong GDP performance, is the large reduction in human capital. This was driven by the significant skills atrophy produce by the rise in long-term unemployment. This quarter, long-term unemployment (LTU) experienced its largest ever jump, pushing it to its highest recorded level. The quarterly increase in LTU was so high; that it outweighed substantial increases in human capital from improving workforce qualifications that characterise most quarters.

  • GDP growth was above average (0.9%). Income (NNI) increased by significantly less, improving by just 0.2%, with the difference largely due to the continuing decline in the terms of trade.
  • Human Capital contracted this quarter by $1.3 bil (0.85%), reversing the continued growth it recorded in 2014. This was driven by increased skills atrophy.
  • Skills atrophy (the loss of skills from sustained unemployment) cost the HALE $3.9 bil more this quarter than last quarter. This is due to the substantial increase in the number of long term unemployed. This quarter, a record 51,000 additional people were considered unemployed for more than 52 weeks (an increase of 32%). This is significantly larger than quarterly changes over the last three years, where long-term unemployment tends to increase by just 2,400 people (which is equivalent to an average quarterly increase of just 2.4%).[2]
  • Adult Formal Education (AFE) continues to support Human capital as greater proportions of the adult population attain higher levels of education.[3] It is estimated that this quarter, an additional 63,000 people obtained post school qualifications. The value of AFE increased by $2.6 bil (3.4%) over the quarter, but this was not large enough to offset the decline in human capital caused by skills atrophy.
  • The weakness in the labour market, apparent in the rise in unemployment and underemployment, is also negatively impacting wellbeing through a reduction in Work Satisfaction.[4] This reduced wellbeing by a further $0.2 bill (2.1%) this quarter. The lion’s share of this is due to the rising unemployment level. The non-economic costs of unemployment experienced a significant deterioration this quarter, worsening by $0.26 bil (10.9%). This is due to a rise in unemployment which peaked in January at 6.8%, which constituted a decade long high. Recent improvements in unemployment however, are expected to at least partially reverse this in the next quarter. Although underemployment improved slightly this quarter, it remains high by historical standards and continues to detract from wellbeing.
  • The extent to which Health reduced non-economic wellbeing grew by $0.4 bil (3.8%). This is due to costs of mental illness and obesity growing by a greater amount than other indicators of health that continue to slowly improve.

[1] This quarter the HALE contracted by $1.29bil. This is $3.1bil below the quarterly trend for the HALE.

[2] The February figure from the ABS puts one person in 60 who is either in work or looking for work as someone who has been unemployed for 52 weeks or more. In February 2013 the ratio was one in 95 and in February 2009 the ratio was one in 124.

[3] In the HALE, the AFE contribution to human capital is measured by estimating the proportion of the population between 20 and 64 years of age who have attained a post-school qualification (Certificate III level or above). The recent growth in AFE is driven by both population increase and increased attainment of qualifications. We estimate that close to 60% of 20-64 year-olds will now have a cert III qualification or higher. This compares favourably to the results from a decade ago where only 47% of 20-64 year olds obtained post school qualifications.

[4] Work Satisfaction (previously referred to as “Job Satisfaction”) is an index in the HALE which examines the wellbeing impact of unemployment, underemployment and overwork over and above direct effects on earnings.

Performing expertise: Getting drawn into the showbiz

How to become an expert in your niche (even if you are not)In an earlier post I’ve talked about how ‘performing’ government drives a range of pathologies – in the case of the post I was suggesting it generates a kind of soft-secrecy. But it drives other pathologies – like bullshit. I put it thus:

Imagine you’re a journalist who has to cover a story on red tape and regulation. Or a politician who has to have something to say on it – or a bureaucrat within government or the BCA who has to come up with a policy on it. What are you going to do? You can’t just sit there and say “I don’t really know”, or “nobody knows more than a tiny part of the puzzle”. Deloitte will be putting its finger I the air and estimating the cost of regulation to the whole economy ($250 billion p.a. since you ask). Why saving just 10 per cent of it would be a huge micro-economic reform. What are you going to say? (Quick, you’re on Insiders on Saturday, cameras will be rolling. Remember, John Kerrin got sacked in the early 90s recession when journalists asked him when the recession would end and he said “Your guess is as good as mine”).

Well there’s only one way through.

And here’s an example of the power and the subtlety of the phenomenon. The other night I did an interview. I was rung at around 4.30 and asked if I’d talk about unemployment. The HALE index had received a lot of publicity about long-term unemployment the previous weekend. I was extremely pressed for time when rung, but said I’d be happy to do so when rung back at 6.15 when the program would be live. I’d been very busy ever since that weekend.

As the presenter voiced over the intro he said that new unemployment numbers had come out that day. “Holy crap” I thought. I didn’t know. What was I to do? Fortunately as the introduction went on, the announcer did introduce long-term unemployment as a major theme. But he’d be reasonably entitled to think that I knew that there had been some fresh numbers out. I was trying to work out what I’d do. The incentives were to brazen it out and bullshit on. But before it became clear that he was going to talk about long-term unemployment I had decided I would just have to come clean and say that I was there to talk about LTU and not the numbers that day. It turned out he was happy with me focusing on what I’d thought I was agreeing to talk about.

Of course one incentive I’m facing is not looking like a nincompoop myself. But I’m also trying not to embarrass the host. And that fact subtly draws one into a role play that isn’t entirely comfortable. In this interview the host said Lateral Economics had done a ‘study’ of long-term unemployment. Well the segment was only five minutes and everyone’s busy pumping out the programs. So that was said on the fly. It wasn’t true. We’d got ABS numbers and run them through the HALE methodology and the story was what that methodology told us – that long-term unemployment had cost the economy nearly $4 billion that quarter – more than the terms of trade. Obviously I wouldn’t have lied if pressed, but I let it go through to the keeper. And so was drawn into the not-entirely-accurate narrative.

 

Early Childhood Education by MOOC: Lessons from Sesame Street

MuppetsOfSesameStreet

Abstract:

Sesame Street is one of the largest early childhood interventions ever to take place.  It was introduced in 1969 as an educational, early childhood program with the explicit goal of preparing preschool age children for school entry. Millions of children watched a typical episode in its early years.  Well-designed studies at its inception provided evidence that watching the show generated an immediate and sizeable increase in test scores.  In this paper we investigate whether the first cohorts of preschool children exposed to Sesame Street experienced improved outcomes subsequently.  We implement an instrumental variables strategy exploiting limitations in television technology generated by distance to a broadcast tower and UHF versus VHF transmission to distinguish counties by Sesame Street reception quality.  We relate this geographic variation to outcomes in Census data including grade-for-age status in 1980, educational attainment in 1990, and labor market outcomes in 2000.

The results indicate that Sesame Street accomplished its goal of improving school readiness; preschool-aged children in areas with better reception when it was introduced were more likely to advance through school as appropriate for their age.  This effect is particularly pronounced for boys and non-Hispanic, black children, as well as children living in economically disadvantaged areas.  The evidence regarding the impact on ultimate educational attainment and labor market outcomes is inconclusive.

NBER Working Paper 1229 by Melissa S. Kearney, Phillip B. Levine  -  #21229 (CH ED LS)

Love, Love, Love by Red Stitch

The supreme vice is shallowness

Oscar Wilde to Bosie

I went to see Love, Love, Love by the terrific actor’s ensemble theatre company Red Stitch tonight. I’d previously seen Grounded which I thought was an Arthur Milleresque masterpiece which was very well delivered by the single actor. Most of Red Stitch’s plays are contemporary plays from around the world – mainly the Anglosphere. The theme of Love, Love, Love is the failure of the dream of the generation of the 60s – now quite a theme. There was another play on at MTC – Jumpy – with a similar theme which is the disillusion of the 60s generation with the way their lives turned out and their strained and uncomprehending relationships with their children.

I didn’t much like either play, though Jumpy was a bit better done I thought. Intriguingly the author of Jumpy was born in 1960 while the author of Love, Love, Love was born in 1980 and the latter play has a much more accusatory air. The basic plot is that a couple of shallow, privileged kids who fancy themselves as free spirits in the ‘Summer of Love’ get married (the guy pinches the girl off his more staid brother in the first scene). They’re both the embodiment of self-centredness dressing it all up in 60s guff about freedom and throwing off the shackles. This scene is full of subtle anachronisms. It’s supposed to be 1967. The word ‘chauvinism’ had barely begun its take-off but is presented as a well worn expression. More importantly there might have been some marketing hype about all that free love in the sixties in the sixties, but few people were really talking like that and except at the fringes, the vibe of the sixties mostly takes off towards the end of the sixties and into the seventies (this was particularly true in Australia, but also I think true elsewhere). The play captured virtually no sense of the immensely repressed nature of normal middle class life then. You get the impression that, with the exception of a few squares it was wall to wall grooviness. (Continued, with some mild spoilers over the page).  Continue reading

#SoftHeadsHardHearts on long-term unemployment

Image result for long-term unemploymentThe HALE index got a bit of attention this weekend owing to the way in which it highlights the cost of long-term unemployment. It’s certainly a graphic illustration of the way in which GDP hides important developments from us. Mostly what people like about the HALE is the way in which it tries to adjust GDP to take account of large and strong impacts on subjective wellbeing that are not picked up by GDP.

Because it’s an index and will ultimately be published as a single number, there’s no point in including things that are not large – as they’ll never get their signal through the noise of everything else. So the main things which are adjusted for known, large and widespread non-economic wellbeing effects are inequality, unemployment, obesity and mental illness. But these things rarely change sufficiently between quarters to generate much news unless the journalist covering the story decides to make them the focus of coverage in some way.

By contrast the things in the index that really drive substantial deviations from GDP are related to the ways in which GDP is a bad measure of economic wellbeing. Because it’s an index of wellbeing, the national accounts series on which the HALE is based is real net national disposable income. This picks up the terms of trade which has been an important part of our economic story particularly lately and the depreciation of capital. This quarter falling terms of trade reduced national income by around 0.7% reducing the quarterly GDP figure from 0.9% to 0.2%.

And one of the things I was most pleased to work out in the methodology of the HALE index was trying to take into account the growth and decay of human capital or the economic value of knowhow on a quarterly ‘accruals’ basis something GDP assiduously avoids as it measures recurrent or income transactions and not capital transactions. I had been highly critical of the leftist stitch up index – the GPI for this reason. Continue reading

The sins of the fathers …

Embedded image permalinkHold the presses – Coal may not be good for humanity. OK that was a cheap ideological shot – the kind you might see on our rival ideologically aligned blogs but surely not here at Club Pony.

In any event, the graphic above is a remarkable illustration of the long lived effect of the culture and economy that grew up around coal in the eighteenth and nineteenth century. If your area mined coal, chances are you voted Labour in the election and you’re more likely to die young (the map on the right being one of life expectancy).

Ratings: the downside

online reputation management

This is the framework all Troppo authors use in their online reputation management (ORM). KPIs are reported monthly. If you notice any Troppo authors going off track, please shoot an email to [email protected]

This article by Maureen O’Dowd on the stress of getting a good rating as a user of a service like Uber is worth pondering. It’s important what ratings are for. They’re supposed to be for the exchange of information. But sometimes they become strategic – like they are, or can become on RateMyProfessor where professors get threatened with strategic strikes against their ratings if they won’t give students what they want – ie good marks or whatever else they’re after.

There’s another problem. Even when the players are not motivated by strategic considerations, they might not be rating each other in a way which is generating the most important information for those who stand in their shoes and who are influenced by their ratings. I had one bad experience on oDesk where a guy I’d hired got irritated with me because I wasn’t giving him clear directions. For me that was a feature, not a bug. I was both trying to optimise my time but also seeking to just gradually explore whether I could work with the guy – was he resourceful, could he figure out what I was after etc. I also asked him to look up some material on a paywalled site. I told him that he could subscribe free for an introductory period of two weeks.

Anyway, all this ended badly. He thought I was trying to exploit him and was insisting that he pay subscriptions to work for me – which I wasn’t. And he was frustrated that my instructions were not clear and copious. But here’s the thing. I was buying a service from him. So the way I see it, so long as I was prepared to underwrite any horsing around, any incomprehension of his of my mysterious ways, that is so long as I was paying him for all the time he claimed to be taking, then I think it’s not that relevant to my rating as an employer if, on the first project, he found me less clear than he would like. (A lot of jobs on oDesk, and a lot of the jobs people are looking for, involve instructions like “copy the data from this website, and paste it into this spreadsheet from cell A1 down to cell A1000.)

Over time if we develop a working relationship and he continues to find my style a pain in the arse, well then that might be relevant to other contractors. In the upshot, while I’m all for the democratisation/equalisation of the employer/employee | contractor/contractee relationship and see ratings as a very powerful mechanism for doing so (why didn’t economic reform develop in that direction years ago?) that has to be oriented around their respective and different needs. People paying for services generally want quality work and a range of ancillary attributes to do with effective cooperation with the person paying. The overwhelming need for the contractor is to have an contractee who won’t be trying to pressure or short-change them – and in the case of my situation on oDesk who will underwrite their claims to work, however useless, while they work out whether they can work together.

 

The generative commons of generalised social capital

Paul Krugman has an interesting blog post on the extent to which there might be contagion from one area of social capital (or lack thereof) to another. He’s responding to the claim CEOs made to him that they only started arcing up their pay demands when they saw sportspeople doing it. And we can all understand the micro-foundations for rises in superstar sportspeople – local sub-urban live audiences morphing into TV audiences at the city, national or global level.

One of the things that’s gradually been happening over the same period is a kind of leeching away of general social solidarity. The most striking aspect of this is a stat I heard on Radio National’s All in the Mind. Asked of the importance of “being very well off financially”

The latest data from 2013 for entering university students here in the US, 82% say that that is an important life goal. And back in the late ’60s and early ’70s only about 45% said that was an important life goal.

Continue reading