Tech Employment MinoritiesIncome Inequality And Mobility

An “epic income-mobility study” released last week suggests that “contrary to widespread belief, it’s no harder to climb the economic ladder in the United States today than it was 20 years ago.”  Apparently, when you are three Ivy League professors and a US Treasury Department official, you get access to the IRS’ tax return data, “which of course are not generally available to researchers” and, of course, is terrific irony.  So “the chance in which kids can climb up or down the income ladder has remained pretty stable over the last 20 to 25 years,” which could be good, except for the fact that “economic mobility in the United States remains behind that of other wealthy countries.  An American born at the bottom has about an 8 percent chance of rising to the top…the odds are twice that in Denmark.”  Furthermore, economic mobility in America varies considerably by region: “Rates of advancement in the Seattle, Washington, D.C., and San Francisco metro areas compared favorably with European countries.”  So, a little history lesson: rising income inequality in the United States and China, while different fundamentally, came about more or less at the same time (late 70s early 80s).  Income inequality in the United States is typically attributed to three factors: technological progress (cutting out middle wage jobs), globalization (outsourcing middle wage jobs) and economic policy (lower taxes for capital income).  (Also, rich people like to marry other rich people.  And the tech/information industry appears to be a boon for minorities.)  While we shouldn’t expect much to change in America until new policies (especially tax reform) come along, the pressures of inequality are naturally easing in China as the skill premium declines with a more educated work force.  So while it may not be any harder to climb the economic ladder since Reagan was President, income inequality is still very real; especially at the top: “Much of the increase in inequality has been driven by the extreme upper tail…and there is little or no correlation between mobility and extreme upper tail inequality…Instead, the correlation between inequality and mobility is driven primarily by “middle class” inequality.”  Furthermore, a healthy middle class means consumer confidence and purchasing power.  Finally, some Fortune 500 companies like Lockheed Martin and Deloitte are pledging to “help minimize hiring discrimination against people who have been out of work for many months or longer.”…p.s. State Of The Union is tonight at 6pm PST

China: China’s Rich Know Bailouts Equal Gold No. 1

“One of the nice things for wealthy people in China is that mysterious, unidentified third parties occasionally swoop in at the last minute to bail them out of investments that are about to default.”

USA: Gov’t, Internet Companies Reach Deal On Disclosure

“The Justice Department on Monday reached agreements with Google Inc., Microsoft Corp., Yahoo Inc., Facebook Inc. and LinkedIn Corp. that would allow them to disclose data on national security orders the companies have received under the Foreign Intelligence Surveillance Act.  While the compromise doesn’t allow companies to disclose everything they wished, and allows them to disclose more than the government originally wanted them to, both sides seem relatively satisfied with the agreement.”

USA: The Federal Government’s Backdoor Bailout Of Puerto Rico

“The Obama administration has already provided a multibillion-dollar bailout to Puerto Rico.  Nobody in the major media outlets has noticed because the issue is highly technical.”  Jonathan Weil describes it like this: “The gist is that Puerto Rico enacted an excise tax on U.S. multinationals that is of questionable constitutionality. The companies don’t mind because they get a credit for the tax. And the Treasury Department isn’t intervening. Sullivan concludes: “A lot of powerful interests like the current situation. They include the government and both major political parties in Puerto Rico, the Obama administration, investors in Puerto Rico’s municipal bonds, and U.S. multinationals that can credit the tax. The only ones on the short end of the stick are U.S. taxpayers, who are footing the bill that they would probably be unwilling to pay if they were ever asked.”

USA: Prices On The Rise, Less So For Homes, Durable Goods Orders Drop, Consumer Confidence Rises

“A growing number of U.S. businesses expect to raise prices in the coming months, according to a new survey by the National Association for Business Economics.  About 43% of companies plan to raise prices in the first three months of 2014, far more than the 20% that said they actually did raise prices in last year’s fourth quarter.  Just over half — 56% — expect prices to stay flat and about 2% expect them to fall.”  Meanwhile, “home prices are showing signs of topping out: The S&P/Case-Shiller index posted its first month-over-month decline in 10 months on Tuesday.  The annual measure of home prices still increased 13.7% in November, but that was only narrowly better than the rise posted in October…National prices are still nearly 20% below peak levels reached in mid-2006.”  Here’s a look at Case-Shiller by Metro Area.  Also, “the Commerce Department said on Tuesday durable goods orders dropped 4.3 percent, pulled down by weak demand for transportation equipment, primary metals, computers and electronic products and capital goods.”  Finally, “the Conference Board, an industry group, said its index of consumer attitudes rose to 80.7 from an [sic] downwardly revised 77.5 in December.  Economists polled by Reuters had expected a reading of 78.1.”

UK: Fastest Growth Since 2007

“Gross domestic product expanded by 1.9% in 2013 — compared with 0.3% in 2012 — and there are signs that the recovery is extending beyond consumer spending and the housing market.”

USA: Obama’s Economy In 17 Charts

Global: Asset Class Dashboard


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