The OECD on income inequality

The new OECD report on income inequality and rising poverty in most OECD countries is just out.

This is the conclusion.

Social mobility is lower in countries with high inequality, such as Italy, the UK and USA, and higher in the Nordic countries where income is distributed more evenly.

Growing inequality is divisive and polarizes societies—Greater income inequality stifles upward mobility between generations, making it harder for talented and hard working people to get the rewards they deserve. Ignoring inequality is not an option.

Children living in countries where there is al large gap between rich and poor are less likely to improve on the education and income attainment of their parents than children living in countries with low income equality. Countries like Denmark and Australia have higher social mobility, while the US, UK and Italy have lower mobility.

I have NOT read the full report in the OECD so I cannot vouch for it. But, not surprisingly, it is in line with my Australia Institute paper, Equality of Opportunity in Australia myth and reality (April 2006). I am happy to send a copy of it to anyone.

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NPOV
NPOV
13 years ago

Are they implying cause and effect here? I.e. that lower income inequality is actually driving social mobility? Surely it’s equally likely that social mobility is contributing towards (pre-tax-and-benefits) loower income inequality?
Indeed, I wouldn’t be surprised if it was something of a virtuous circle.

Rafe Champion
13 years ago

Quite likely a critical analysis will reveal that the relationship between causes and effects is the reverse of the interpretation that the welfare lobby will put on it. Australian data have been circulated to indicate that inequality has not increased in recent years, that is, under the regime of partial deregulation. It is most likely that the road to improved circumstances for the poor will not involve redistribution but will involve a shift in the incentives that people are offered and the value and attitudes that are fostered towards enterprise and achievement.

melaleuca
melaleuca
13 years ago

“It is most likely that the road to improved circumstances for the poor will not involve redistribution but will involve a shift in the incentives that people are offered and the value and attitudes that are fostered towards enterprise and achievement.”

That’s right, Rafe, keep singing from the Party song book.

NPOV
NPOV
13 years ago

Rafe, if that’s the case then surely you accept that the Nordic states with their extensive degree of state involvement with the economy, including very generous degrees of wealth distribution (not just income, but in actual services provided by the state), still manage to maintain high incentives for “enterprise and achievement”.

melaleuca
melaleuca
13 years ago

It’s hilarious watching libertarians yip and squeal when you inform them how the observable and well reported experiences of the Social Democracies refute much of their ideology. I suggest we have much more to learn from them than we do from endless reiterations of passages from dusty old texts written by dead Austrians and Karl Popper (PBUH).

jrbarch
jrbarch
13 years ago

What is the essence of ‘equality of opportunity’?

A friend, speaking recently about the importance of understanding something about your own existence, emphasised the role of passion.

Without passion:
. there can be no compassion;
. without compassion there can be no understanding;
. without understanding there can be no personal growth (elevation of vision);
. without personal growth there can be no admiration;
. without admiration there can be no gratitude;
. without gratitude there is no passion.

With logic everybody is right and nobody is w r o n g.

People living on one side of the street think that everybody living on the other side of the street are definitely wrong, and vice versa. Maybe both are right!

Maybe both are right because reason and logic continue to fail us, and compassion has not been tried yet! The blatant abuse of reason and logic by some people, including businesses, politicians, financiers, journalists (and even academics who should know better) proves the point. Systems are always fraught with human fraility.

With compassion the heart rules; is granted higher status and nobler origin, and the mind follows serving humanity rather than self. This message is as old and older than Buddhism, and is extremely practical if we only had the passion and compassion to understand it. Through the fogs of our own stupidity and pain we look around us and wonder why we create so much havoc. Human beings hurting their own kind, and their own planet and life forms! Is this intelligence?

Is not compassion the essence of ‘equality of opportunity’?

Have tried to expand on this topic a little more here:

jrbarch
jrbarch
13 years ago

Sorry –

Have tried to expand on this topic a little more here:

conrad
conrad
13 years ago

“Social mobility is lower in countries with high inequality, such as Italy, the UK and USA”…”Countries like Denmark and Australia have higher social mobility”

I wonder if anyone bothered to actually check the inequality indexes before making these comments. Both Italy and the UK have almost identical Gini index numbers as Australia. So it’s hardly the best example to support their claims.

I imagine this means that Australia has high social mobility despite moderate inequality.

NPOV
NPOV
13 years ago

Conrad, according to the data sheets the report references:

http://www.oecd.org/dataoecd/44/47/41525263.pdf shows Australia’s GINI coefficient at 0.30, somewhat below the OECD average.

http://www.oecd.org/dataoecd/44/47/41525263.pdf shows the UK’s GINI coefficient at nearly 0.34, somewhat above the OECD average.

http://www.oecd.org/dataoecd/44/44/41524626.pdf shows Italy’s GINI coefficient at over 0.35, well above the OECD average.

I couldn’t find the data sheet for Denmark.

conrad
conrad
13 years ago

Wikipedia has a list of them from various places and times

http://en.wikipedia.org/wiki/List_of_countries_by_income_equality.

From the CIA fact book (just the people we should be trusting :) Denmark is .24 and Aus is .305. I might note that .34 is not exceptionally high by any stretch of the imagination if you look at what other countries have (the unweighted average of all countires is around .40). So it’s an odd statement based on that observation also.

NPOV
NPOV
13 years ago

There are only 6 countries in the OECD (Italy, Poland, USA, PRT, Turkey, Portugal & Mexico) with GINI co-efficients over 0.35.
Other than U.S. (and even there social mobility has decreased markedly in recent years), I would be surprised if social mobility was particularly high in any of those countries.
I am curious how the BRIC nations compare to the OECD trend.

NPOV
NPOV
13 years ago

(ignore “PRT” above – PRT is Portugal)

James Farrell
13 years ago

NPOV, you are probably right that the causality works both ways. The causation from inequality to immobility is clear enough: the poorer a person starts out, the lower his probability of advancing to a higher income quintile — so in the aggregate, a smaller proportion will be advancing. The reverse casuation is not so obvious: if countries A and B start with the same initial income distribution, but mobility is lower in A, would we expect the distribution to get moer unequal there relative to that in B over time? I think so, because an individual’s (or family’s advantages) or disadvantages are more likely to compound, the longer they stay in a particular quintile.

Having said that, I’d like to see how the report measures mobility, and what interpretation it proposes.

James Farrell
13 years ago

an individuals (or familys advantages) or disadvantages

should read

an individuals (or familys) advantages or disadvantages

Matt C
Matt C
13 years ago

Hi Fred,
How can I obtain a copy of your Australia Institute paper?
Thanks.

davebath
13 years ago

(1) I’m interested in the paper, and you have my email!
(2) The GINI is rarely mentioned by politicians, although it is one of the few tools to talk quantitatively (and therefore not merely in waffly unverifiable politicospeak) about the ‘land of the fair go’.
(3) I’m actually a big fan of the CIA fact book: when a lefty uses figures from it to make a point (such as health/education/mortality outcomes per capita per GDP), it’s darn hard for the right-wingers to criticize the data!
(4) I was looking at longitudinal data over the decades from The Economist (can’t give a link) a while back. The teutons and nordics have already got low, and have levelled off, the US is generally going higher (with Oz and Britain generally going up, but less precipitously), while the french and co are overall going down.
(5) Another good measure is the percentiles of people on various multiples of the average/median/modal wages. Again, the northern europeans after tax have comparatively little difference between the wealthy and the poor. It’s worth remembering that back in ancient athens, the income factor between a low-level infantry class soldier and a “noble” (who could afford their own horse, hence “hippei”) has been estimated at between 3 and 10. Imagine if the top earners only got 10 times as much as the minimum wage!

Rafe Champion
13 years ago

Do we have a problem of rising poverty, or just a situation where most everyone is doing better but according to some measures the people at the bottom are not catching up, even though they are better off than they were in the past?

This is not just a semantic point because the quest for equality of outcomes (as distinct from equality of opportunity) can become a Utopian dream, never capable of realisation but promoting discontent (and vote-buying) regardless of the outcomes, which can even be the opposite of the intentions. For example if you are looking for Brutopias in Australia you will not find them among the aspiring classes but among the groups that have lived for some time on passive welfare, like some of the remote Aboriginal communities and precincts with high concentrations of families with third generation welfare dependents.

What do GINI coefficients tell you about the ecology of individual nations or districts that might enable us to craft interventions that will make a difference? Working along those lines looks like a technocratic exercise, good for doctoral dissertations and the like but what light is shed on the social and cultural determinants of wealth and poverty?

Some research suggests that there is a rapid turnover at the low end of income, and the problem people are not those who start at the bottom but those who do not manage to move on. Attempts to move everyone on by redistribution can result in poverty traps for some and the growing phenomenon of middle class welfare for others, along with the expectation that someone else is supposed to provide things that people could organise for themselves with foresight and planning like buying the first home, child care, parental leave, etc.

Talking about Gini coefficients and the measurement of inequality diverts attention from the most intractable and difficult welfare problems – the problems of people with chronic mental and physical disabilities, the carers of these people, people who live lives that are rendered chaotic by drugs, alcohol and dysfunctional family backgrounds. And even here, passive welfare and loss of the bourgeoise virtues account for many avoidable problems, but we arn’t supposed to say that because it is moralistic and preachy:)

James Farrell
13 years ago

Talking about Gini coefficients and the measurement of inequality diverts attention… [etc., etc.]

Yes, and might I say what a comfort it is to know that, while these teams of preposterous boffins are squandering their days, not to mention my money, calculating their pointless Ginis and mobility statistics, at least one man is out there, day after day, sleeves rolled up, curing the alcoholics, tending to the chronically and mentally ill, giving courage to the carers, and keeping those bourgeois values alive. But don’t waste too much time writing blog comments, Rafe.

James Farrell
13 years ago

Fred’s paper is here, by the way.

davebath
13 years ago

On “diverting attention from the most intractable and difficult welfare problems”

(1) Actually, I’m very well aware of such issues: chronic unpredictable disease that makes “normal” work difficult, stressed out into full on depression after trying to get a previous employer to meet regulatory obligations, and formerly a single dad. I’m one of the vulnerable ones, but (just) managing to keep my head above water. (In the last couple of weeks I’ve probably spent a couple of months when I haven’t been able to afford anything to eat but milk, weetbix and bread- thank goodness for my bottle of multivitamins!)

(2) This is why I’ve already sent comments to the relevant minister on improving the way the disabled are treated with a view to improved social inclusion and bettering the chance of fulfilling work. This is now open for public comment until december (I think), so I encourage all those cynical anti-gini types to avoid accusations of hypocrisy by contributing to the consultation announced here (2008-10-17: “Calling for input to the National Disability Strategy”) with the background discussion paper, a formal call for comments, and even an “Easy English” version with fill-in-the-blanks responses encouraged. See http://www.fahcsia.gov.au/disability/nds for the forms to express your opinion on these issues.

If you folk against the discussion of more abstract elements of society (such as the GINI) are already preparing your responses to the National Disability Strategy discussion paper, or will get it done on time, then I apologise unreservedly for suggesting you might be hypocritical.

davebath
13 years ago

Correction: should have said “last couple of YEARS I’ve probably spent a couple of months” rather than “last couple of WEEKS I probably spent a couple of months”.

NPOV
NPOV
13 years ago

I assume you didn’t actually mean “reduce” there Fred…

Rafe, I don’t see there’s any “quest for equality of outcomes” – merely that rising inequality is a symptom of inadequate attention being given to helping those at the bottom raise their living standards. Partly this will come through enabling measures – better education/training/health treatment etc. etc., but partly it will come through redistribution. Just the nature of techological improvements will tend to mean that those with the most money will get better and better at creating more wealth than those with the least, and hence if we don’t want to live in an increasing unequal society (presumably it doesn’t bother you, but it certainly bothers me), there seems to be little choice but increasing levels of redistribution (which I prefer to think of as “the degree to which we consider our wealth to be shared”).

Patrick
13 years ago

I would be most interested in inequality between the bottom 95%, or at least the bottom 98%. I genuinely don’t care about the top 5% and I don’t think, from a policy perspective, we should even consider them, really (except, perhaps, from a tax policy perspective).

Rafe Champion
13 years ago

Re 20, James, would you like to give an example of a study of Gini coefficients which contributes to the planning and evaluation of strategies to address pockets of serious disadvantage?
As to the second part of your comment, are you just mocking me or the people who spend their days helping people in trouble?

Re 25, Fred, where have I ever given the US top marks for anything? I appreciate the importance of access to education and especially good education but the public education system in the US has gone seriously downhill since WW2 (at least according to Jacques Barzun), why would I give them top marks for that? Not to mention all the other dysfunctional policies that they have in place on welfare, corporate support and protectionism.

Rafe Champion
13 years ago

To be crystal clear, I give the US very LOW marks on laissez faire! Anyone who thinks that the US can be regarded as a paradigm of laissez faire has been taken in by occasional outbursts of free trade rhetoric by the likes of Geo Bush which fly in the face of the mass of public spending and the constraints on trade and property rights. The most obvious and damaging incursions into free trade and accountability of traders in recent times are those actions that resulted in the debacle of Fannie and Freddie!

NPOV
NPOV
13 years ago

Curious, Patrick, do you really think that the freedom and opportunities of 95% of the population would not be threatened by the possibility of the top 5% controlling the vast majority of a country’s wealth? Because that’s almost exactly how things are in most developing nations, and there’s a good deal of evidence it breeds resentment, corruption and exploitation. Or do you not think that governments can be bought?

pedro
pedro
13 years ago

Does redistribution really create new opportunites for those receiving the distributions (other than the opportunity to spend more money of course)? I should have thought opportunity would be best enhanced by ensuring educational opportunites, but not generally redistributing to flatten the income profile, thus maintaining the incentive to make use of the education.

NPOV
NPOV
13 years ago

The opportunity to spend money is a pretty important opportunity though.
And redistribution isn’t entirely about creating new employment opportunities for the less-fortunate: part of it is simply an acceptance that market allocation of wages is often extreme and, I’d argue, rather unjust. Without any income redistribution, a family where both parents work hard and do their best as call centre operators or retail salespeople would barely be able to feed themselves, while a family where one parent happens to be have the knack of being a particularly successful real estate agent would be living a very comfortable existence. Now there’s not a lot an individual call centre operator or retail salesperson can do to improve their own productivity, and our economy needs such workers just as much as it needs real-estate agents, so I’d argue redistribution is simply a way of adding a “social recognition” of their contribution to the economy to the fairly minimal recognition that the market gives.

pedro
pedro
13 years ago

NPOV, my comment was only in the context of the link with opportunity, which I took to mean the opportunity to advance one’s circumstances. Only an idiot would think there is no need for a level of redistribution, though I imagine we might have some ding-dong arguments about the proper level.

I can’t see any argument to say that a working person contributes more to the economy than is reflected in a market wage. The market being the only way of valuing economic contributions. If the market wage for a call-center operator is low it must mean the value of the work is low. The political decision that there should be a minimum income addresses the issue of how we want society to work. Hopefully without unintended consequences about disincentives to work. I’d be especially happy to see a negative tax system for the low paid, but I hate pretending something is worth more than it is, or that people who have earned lots of money have an obligation to give something back to society. After all, the money was earned by giving something to society in the first place. I suppose some wag will point to the investment bankers who earned lots creating part of the financial crisis, but the give something back idea also gets applied to people like Harry Trigubof.

NPOV
NPOV
13 years ago

“If the market wage for a call-center operator is low it must mean the value of the work is low”

Well admittedly it would seem that if a call centre operator was capable of generating significantly more value for a company than the wages they were being paid then you’d think companies wouldn’t consistently understaff call-centres resulting in overlong waiting times for customers. But customer attitudes are a big part of this – every time a customer decides to stick with a particular company despite his or her frustrations with their call-centre, they are unwittingly pushing down call-centre operator wages. Indeed, if customers were less tolerant of poor service in general not only would we get better service, but the workers directly providing the services would almost certainly be paid better.
So why as customers are we so tolerant of poor service? Is it a sort of market failure?

Of course the other big downward pressure on call-centre wages is offshore labor – there are relatively few advantages that developed countries have as a location to set-up call-centres these days. Whereas of course real-estate agents don’t have to compete with anybody in India or the Phillipines. But, it must be said, nor do retail salespeople/assistants – though they do often have to compete with teenagers, which presumably exerts some amount of downward pressure on those wages.

pedro
pedro
13 years ago

I think call centre wages are driven more by competition for staff between call centre operators and alternative employment opportunities. I understand it is high turnover, so maybe that is a reflection of the people who want that work, travellers and such. I doubt customer tolerance has much impact at all, though clearly customer expectations of service levels will have an effect on recruitment and skill requirements will likely drive up wages.

Low skilled jobs tend to move off-shore because there are more low skilled people there. Personally I want aussies to be high skilled if at all possible.

NPOV
NPOV
13 years ago

Well it depends on the call-centre – my wife worked in an HP call-centre that was highly specialized, and required extensive understanding of a range of technologies. She was still paid pretty poorly, and only stayed in the job because the company was sponsoring her visa. Ultimately the call-centre was moved to India.

It’s not clear to me that a successful real-estate agent is particularly more skilled than a specialist call-centre technician.

“Low skilled jobs tend to move off-shore because there are more low skilled people there”

Ok, but it’s becoming increasingly the case that medium skilled jobs are tending to move off-shore too, because even if you need 2 or 3 low skilled off-shore workers to match the capability of one medium-skilled Western worker it’s still cheaper to do business that way. And it’s clearly not possible for ALL workers in every Western country to be so highly skilled that they can be competitive with workers in poorer countries. Now it’s true that eventually those poorer countries will become wealthy enough that wages and labor conditions there will eventually rise to the point that they are not too dissimilar to developed nations, but given the huge masses of labor available, that could take 4 or 5 decades at least, and it’s not entirely clear what the solution is for workers in Western countries only capable of low to medium-skilled jobs.

pedro
pedro
13 years ago

The real estate agent probably has different skills that are valued more highly. Mind you, some real estate agents struggle to make a living and some do very well. As a property lawyer, I can only say I wish I’d gotten a dollar each time I’ve heard another lawyer complain about how much the stupid agent got for commission compared to the legal fees on the deal. Naturally we lawyers think our contribution is essential while the agent gets a big cheque for nothing. Truth is that the agent made the sale for the client.

Your concern about low skilled workers is best addressed by allowing wages to fall and topping up incomes with a negative tax. The alternatives are welfare traps and protectionism, and I think both have a greater cost to society than a negative income tax. No doubt somebody will beat me up for not believing in minimum wages, but price fixing is price fixing.

NPOV
NPOV
13 years ago

Well I don’t have a problem with the concept of a negative tax, though as has been discussed here before, there is still an argument for supporting it with a minimum wage to prevent a blow-out in the degree to which the government is required to support low-wage earners. I can’t see why anyone here would “beat anyone up” for not believing in minimum wages, but the fact remains that they are a politically feasible way of supporting low wage earners that the evidence would suggest doesn’t have too many serious unintended consequences.

What do you mean by ‘protectionism’ in this instance? Are you supposing that a tariff could be charged on calls to foreign call-centres? And if so, how could you be so sure that such a tariff has any more of a negative effect than any number of other ways in which governments raise revenue?

pedro
pedro
13 years ago

I only mean that tariffs are some times used to protect low skilled jobs, such as TCF tariffs. I don’t think you can protect call centre jobs. But I’m happy enough to see some jobs disappear. I’m sure glad the shit-cart guys are out of work and I expect technology substitution gets rid of more unskilled workers than foreign competition (don’t quote me though cause I don’t know the figures). When I started in law solicitors had 2 secretaries each. Now a lot of places 1 secretary is shared by 3 or 4 solicitors, thanks to the PC.

A protective tariff has a negative effect because of rent seeking, but a general tariff is just a tax and I think a small tariff should be used to pay for customs costs.

I’m not sure the minimum wage is so uncontroversial, but I think a negative income tax helps keep the minimum wage at levels that will minimise distortions. Without the NIT the argument gets too focused on living standards.
http://en.wikipedia.org/wiki/Minimum_wage
http://www.house.gov/jec/cost-gov/regs/minimum/50years.htm
http://www.raiseminwage.org/id3.html

NPOV
NPOV
13 years ago

“I expect technology substitution gets rid of more unskilled workers than foreign competition”

No disagreement there, except I’m not particularly talking about unskilled workers. It’s not clear why technology substitution would be an issue with the sort of call-centre work my wife was doing, or indeed any number of IT type jobs (including programming, my own field) that many companies are finding it more profitable to ship off to India in particular. The fact is that India *does* have lots of skilled IT workers that are not really any more productive than local workers, but purely because relative costs (and standards) of living are different, are fairly cheap for companies based in Western nations to employ, which must be acting in some way to keep wages down for IT workers in Western nations (I must say though as a programmer myself I’m certainly not complaining about my own wage – I actually don’t have a good explanation as to why my employer, who is based in the U.S., thinks I’m worth so much more than the sort of salary he would have to pay an India-based programmer).

pedro
pedro
13 years ago

NPOV, you’re probably like my wife, who thinks she is crap at her job, but her employers have clearly shown through a couple of rounds of retrenchments that she is perhaps their most valued employee. I expect he/she thinks you deliver great work.

I think the good news about India is that those IT employees will probably cost the same as local ones in the not too distant future. I wonder how much of the cost differential actually reflects the different size of government per capita?

I suppose there is no answer to your question about IT or call centre workers. Either you are in favour of free trade, for the over all gains and despite sectional dislocations, or you are not. If against (and I’m not suggesting you are), I think you have justify why IT customers should pay higher costs. I expect you would need wage subsidies to protect IT workers because it would be enormously damaging to impose IT tariffs.

NPOV
NPOV
13 years ago

Actually I don’t think I’m crap at my job at all, but I do find it hard to believe my employer thinks I’m 10 times more valuable than a good India-based programmer.

I’m not so optimistic about your “not too distant future”. India has a big enough population that it could probably provide the entire world’s off-shorable IT expertise, and at current rates of economic growth, India still has a good century to go before it reaches the wealth of most developed nations.

“Either you are in favour of free trade…or you are not”

Define “free trade”! Trade with no with restrictions at all? Trade with no taxes on imports? The former I certainly can’t imagine myself supporting. The latter, sure, provided you can demonstrate that there are better ways of dealing with any costs that arise from off-shoring.

pedro
pedro
13 years ago

Yep, trade with no restrictions (other than sensible stuff about criminal activity). I don’t count taxes to fund the cost of customes and such as protectionism. Other than naked protectionism, the only other justification for trade restrictions that I have heard of is “fair trade”, but that harms the people it is supposed to protect.

I’m not sure any costs have been identified from off-shoring. If you lose your IT job to an indian then you can get another job. Also, what are the moral relevance of national boundaries to the distribution of economic goods? Is economic nationalism defensible? I have a hard time thinking how it could be.

NPOV
NPOV
13 years ago

Well you say “sensible stuff about criminal activity”, but I’d be the first to argue that one of the biggest areas of criminal trade – that of recreational drugs – is one that could benefit from far fewer restrictions (though actually what I’m interested in regulation that actually works – such as the food and safety standards that apply to legal drugs, food products etc.)
So I don’t think you can just hand wave about what’s sensible and what’s not.

As far “economic nationalism” – unfortunately democracy practically dictates that. No-one else other than the government of Australia has any mandate or political responsibility to the Australian people, so realistically, yes it has to put the interest of Australians ahead of non-citizens. Obviously there are often very good economic arguments that demonstrate that certain forms of restrictions that may be intended to protect the interest of citizens fail to do that (high tariffs, quotas etc.), but I don’t accept that governments should simply sit back and claim that any attempt to look after the interest of Australians is guaranteed to backfire.

The “if you lose your job you can get another one” argument is fine as far as it goes, but when someone has spent the better part of their life building up their skills in a particular industry, dedicating their professional life to it, and supporting a family and a mortgage on that skill-base, then it suddenly turns out that those skills are no longer needed because they can be found cheaper elsewhere, I don’t see how you can argue there is NO cost. Personally, if something forced me to change careers, our family would have no choice but to sell our house, most of our assets, and resort to a much lower standard of living, while I retrained myself in a field where Australia could be competitive. Worse, it’s not even something I can insure myself against – ideally I would be happy to voluntarily pay for insurance that enables me to support our family’s current standard of living while I retrain myself in such a situation, but no company I know of even offers such a type of insurance. Given no private insurer sees fit to do so, why can’t the government?

pedro
pedro
13 years ago

I do acknowledge the personal cost NPOV. But there would be countless job types lost to technological advance as well as off-shore competition. Society is advantaged by them. The personal cost is helped through the welfare system but largely borne by the affected individuals. But the societal view should be that everyone must accept that the past is not guaranteed by the future and prepare themselves accordingly.

I’m not intending to hand wave about trade restrictions. I only mean those that are intended to protect industry. The Kiwis are complaining about our restrictions on their apples, claimed to be necessary to stop the import of fireblight. If the science is right then keep the apples out, if the science is wrong then lets not lie to our neighbours to advantage our farmers at the cost of consumers.

I only raise the point about economic nationalism because we have been discussing the justice of protection. No question that it is a political reality, my point is that it is not necessarily something to be proud of if we put local workers ahead of poor foreigners. the poor old africans want to sell europe food and all they get are hand outs and the occasion big rock concert.

NPOV
NPOV
13 years ago

“The personal cost is…largely borne by the affected individuals”

Well, I wouldn’t be so sure. And I would leave out the word “personal”.

My only concern is we strive to mitigate the worst effects of inevitable off-shoring and technological-replacement of industries. In some cases that may well involve small amounts of gradually-phased-out subsidisies to allow businesses to fold via natural attrition, in others it may involve direct support to help businesses retrain staff/upgrade equipment etc. As a last resort it may involve minimal doses of old-fashioned protectionism. Yes, there are risks in any of those strategies, and there’s a potential cost in getting them wrong – but there’s a definitive cost in simply pretending that there are no issues, and part of the job of government is to ensure that such costs are kept to a minimum. Given that there will always be huge political pressure on governments to protect workers, there’s little point pushing a line of “we refuse to help anyone” anyway, so I’d much rather that governments concentrate instead on which methods are least like to throw up nasty unintended consequences.

Tel_
Tel_
13 years ago

Its not clear to me that a successful real-estate agent is particularly more skilled than a specialist call-centre technician.

I think the real estate industry is ripe for a computer-oriented takeover. For what it’s worth (not much to me) here’s my ideas:

On the sales side, the main issue is that assessment of house value is a time consuming process and of course the buyer cannot trust the seller. The agent helps by bringing more buyers and sellers together faster and culling out the matchups that will obviously never work. A computer could do it better and faster. There are a number of internet websites covering property and most of them show agency property only (no sneaking round the gatekeeper). This barrier can’t last, and I predict that direct buyer/seller transactions will become more common.

On the rental side, it is a whole different ballgame. Long term profitable rental management is a skilled task, well beyond most owners, and also beyond many agents. Most real estate agencies are small, and do a bit of rental on the side but see the big money in sales. Rental is an annoying, low margin, thing that requires effort. I can see an opening for a network based rental management system that runs to a nice formula, makes low margins but also runs on low overheads. With proper computer assistance and a good formula, one person can manage many dozens of properties. I’m happy to collaborate on this one if someone wants to give it a whack (I have plenty of computer skills but real estate law is too arcane for me).

Rafe Champion
13 years ago

On the topics of overseas outsourcing and Indian call centres, this piece from Catallaxy may be interesting. It concerns the outsourcing of the US Presidency.

“We believe this is a wise move financially. The cost savings should be significant, stated Congressman Thomas Reynolds (R-Wash). Reynolds, with the aid of the GAO (the General Accounting Office), has studied outsourcing of American jobs extensively. We cannot expect to remain competitive on the world stage with the current level of cash outlay, Reynolds noted.