Education: basic economics.

The findings reported in the article below only reinforce my view that education is the single most important factor in moving any society forward, and we are lacking. When it comes to Economics, most people don’t understand the basics – at all. In a society where young people are supposed to be better educated lack a real understanding of how the system works, we have a problem.


Article: Millennials’ Political Views Don’t Make Any Sense

That’s not a harsh assessment. It’s just a fair description.

Millennial politics is simple, really. Young people support big government, unless it costs any more money. They’re for smaller government, unless budget cuts scratch a program they’ve heard of. They’d like Washington to fix everything, just so long as it doesn’t run anything. That’s all from a new Reason Foundation poll surveying 2,000 young adults between the ages of 18 and 29. Millennials’ political views are, at best, in a stage of constant metamorphosis and, at worst, “totally incoherent,” as Dylan Matthews puts it. It’s not just the Reason Foundation. In March, Pew came out with a similar survey of Millennial attitudes that offered another smorgasbord of paradoxes:

    • Millennials hate the political parties more than everyone else, but they have the highest opinion of Congress.
    • Young people are the most likely to be single parents and the least likely to approve of single parenthood.
    • Young people voted overwhelmingly for Obama when he promised universal health care, but they oppose his universal health care law as much as the rest of the country … even though they still pledge high support for universal health care. (Like other groups, but more so: They seem allergic to the term Obamacare.)

1. Millennials are more liberal than the rest of the country, particularly on social issues, but they get more economically conservative when they make more money.

Richer Millennials on Redistribution: No, Thanks

Reason Foundation

2. Millennials don’t know what they’re talking about when it comes to economics.

Young people lean way left on issues like gay marriage, pot, and immigration. On abortion and gun control, they swim closer to the rest of the electorate. But on economics, they’re all over the map. You get the sense, reading the Reason Foundation and Pew studies, that a savvy pollster could trick a young person into supporting basically any economic policy in the world with the right combination of triggers. Conservative and liberal partisans can cherry-pick this survey to paint Millennials as whatever ideology they want. To wit:

  • On spending: Conservatives can say: 65 percent of Millennials would like to cut spending. Liberals can say: 62 percent would like to spend more on infrastructure and jobs.
  • On taxes: Conservatives can say: 58 percent of Millennials want to cut taxes overall. Liberals can say: 66 percent want to raise taxes on the wealthy.
  • On government’s role in our lives: Conservatives can say: 66 percent of Millennials say that “when something is funded by the government, it is usually inefficient and wasteful.” Liberals can say: More than two-thirds think the government should guarantee food, shelter, and a living wage.
  • On government size: Conservatives can say: 57 percent want smaller government with fewer services (if you mention the magic word “taxes”). Liberals can say: 54 percent want larger government with more services (if you don’t mention “taxes”).
Overall, Millennials offer the murky impression of a generation that doesn’t really understand basic economics. To be fair, neither do most Americans. Or many economists, perhaps. Or most journalists. Economics is hard.

Socialism or Capitalism?

Reason Foundation

Source: originally published by Derek Thompson at The Atlantic.

A book: private equity at work.

Does private equity kill jobs? Four conclusions from the book, “Private Equity at Work” by economists Elieen Appelbaum and Rosemary Batt.

  • Private equity owners cut more jobs than other companies, but the net effect is minimal. One paper cited, led by university of Chicago economist Steven Davis and reviewing 3,200 firms acquired between 1980 and 2005, found that buyouts lead to more job creation and destruction than companies that were not bought by private equity investors. The destruction arises from firing workers at existing establishments (such as stores or plants), while the creation comes from PE-owned companies investing in new facilities. On balance, employment within two years of the buyout shrinks at PE-owned firms relative to the control group, but the difference is less than 1%.

  • Executives fare worse in terms of job retention. One study found that 39% of CEOs were replaced in the first hundred days of a buyout, and 69% were replaced at some point during PE ownership. “When private equity takes over a company, they put their people on the board of directors, draw up a 100-day plan and say to the managers, “If you can meet our targets, we’ll make you richer than you thought you could ever be, and if you don’t, you’ll be out of a job,’” said Appelbaum on a recent conference call about the book.
  • For rank-and-file workers, wages fall. More research from Davis and his co-authors indicates that wages dip in the two years after private-equity buyouts (though the results vary by industry) even though productivity rises. This suggests that financial gains from higher productivity are being converted into returns for owners rather than salary bumps for employees.
  • Private-equity owners are no more hostile to labor unions than executives of public companies. “While some PE firms market themselves as union-friendly, others are hostile, and still others are agnostic,” the authors write. “Their range of attitudes does not seem to differ substantially from those of U.S. employers more generally.”

Original post: The Wall Street Journal.

March employment report.

U.S. non-farm payrolls grew by 192,000 in March 2014, close to expectations. January and February payrolls were revised up by a combined 37,000. Despite the growth, the average for the first quarter of 2014 was just 178,000, below the 2013 full-year average of 194,000. The latest employment report shows an economy that is adding jobs but not at a very strong pace.

The unemployment rate held steady at 6.7% in spite of an increase in total employment. This could be attributed to the labor-force participation rate rising to 63.2% in March. The labor force participation rate had been trending lower in the the last decade and went into free-fall during the recession.

Despite the increase in the employment-population ration and rise in the labor-force participation rate, there are still key issues that need to be addressed in order to reach the desired levels of growth. The number of long-term unemployed changed little in March, accounting for 35.8% of the unemployed, at 3.7 million. There is still a lot of work to be done.


Source: Bureau of Labor Statistics.

The wealth gap.

Median household income was USD 51,017 in 2012, not statistically different in real terms from the 2011 median of USD 51,100. This followed two consecutive annual declines. In 2012, real median household income was 8.3% lower than in 2007, the year before the most recent recession.

Median income for the bottom 20% fell 10% since 2007, while the wealthiest 5% have already seen its median income bounced back to 2007 levels.

A low-cost country.

Higher productivity lowers effective labor costs and places the U.S. in a favorable production-cost advantage compared to other developed economies that lead manufacturing. According to a study by the Boston Consulting Group, there are three key drivers of this cost advantage: labor, energy, and shipping rates.



The U.S. labor market is currently more attractive than that of any other major manufacturers among the developed economies. Some interesting points to consider when looking at Foreign Direct Investment policies and other incentives to drive productivity.

Source: Boston Consulting Group