Global Economic Watch


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  • Babysitting Wages Continue to Rise

    Most U.S. workers are waiting for the recovery to speed up enough that wages begin to grow again. But what if I were to tell you that there is a sector that continues to see real growth? A sector where workers are able to charge more and more because their work is valued and always seems in demand. Is that something that would interest you? It may even be work you have done before. Babysitting. The Boston Globe 's Megan Woolhouse writes that the average rate for babysitting is $12/hour--well above minimum wage, and the average hourly wages in a lot of service sector jobs. As high rates cramp date nights, several factors are influencing the economics of baby-sitting. Internet services such as Craigslist have created greater transparency, allowing sitters to see what their competition charges and raise rates to what the market can bear. Busy two-earner families are not only increasing demand for sitters, but their higher incomes make them more willing to pay higher rates for older, more experienced sitters. That trend coincides with a weak job market that is making college students and even recent graduates willing to take such work. Finally, with so many teens busy with after-school activities from SAT prep classes to high school sports to community service, their time is more valuable, meaning they want higher pay to put aside these pursuits. Economists call this phenomenon “opportunity cost.” “You’d be hard pressed to find [another] profession where you see any wage growth,” said Erica Groshen, commissioner of US Bureau of Labor Statistics, which tracks employment, wages, and other job-market data. Read In era of stalled wages, baby sitters surging ahead here .
  • Rethinking the Advance of the Robots and What it Means for Jobs

    We have been taught to believe that advancing technology lifts most (if not all) boats. That workers will have better lives as computers and robots take over some of the more mundane tasks. But writing for the Boston Globe's Ideas section, Sarah Laskow points out that some key economists are no longer so sure: PART OF THE REASON economists are rethinking the impact of technological change is that machines can do so much more than they ever could before—enough to replace human workers outright. Not everyone wants to use the word robots: As Leamer pointed out in an e-mail, it “suggests physical labor, as in robots are replacing humans in manufacturing.” But whether you call them robots, smart machines, or computers, they are replacing not only factory workers, but tax preparers, bank tellers, service workers, and other people in jobs for which humans once seemed uniquely qualified. To Laurence Kotlikoff, a Boston University economist who’s interested in generational equity, the change is obvious. In the past, taxis might have replaced horse-drawn hansom cabs, but both required human drivers. The driverless cars being developing today will conduct themselves. Jeffrey Sachs, an economist who heads Columbia University’s Earth Institute, had made the same observation: “There are auto plants where you go where there are basically no workers inside,” he says. At one he visited a few years back, there was no mess, no grease—“just this humming sound of huge robots working.” In the context of rising unemployment, these observations prompted Sachs and Kotlikoff to ask an uncomfortable question: “What if the Luddites are now getting it right?” they write. In a new working paper titled “Smart Machines and Long-Term Misery,” they pursue this question and reach a worrisome conclusion: Computer programs and robots may now be competing with workers in a way that leaves some groups—including supposedly tech-savvy young people—worse off in the long term. It was clear to Sachs and Kotlikoff that something was messing with the wages of younger workers. While 60 years ago, the income of men between 45 and 54 beat out that of 25- to 34-year-old men by 4 percent, today the gap has grown to 41 percent. Young people might be comfortable with smartphones and fluent on the Internet, but that doesn’t necessarily mean they have the skills to land those jobs that robots haven’t made obsolete. Read Will a robot take your kid's job? here .
  • Profits Rise, but Wages Remain Stagnant

    With all the focus on unemployment, a lot of us have lost sight of the fact that those workers with jobs have not seen their wages rise significantly, if at all, over the last few years. The Boston Globe 's Jay Fitzgerald reports on the findings of a new study by Northeastern University's Center for Labor Market Studies that shows worker salaries have not moved up along with corporate profits. Corporate profits have increased by 93 percent before taxes from the fourth quarter of 2008 through the fourth quarter of 2011, rising to a record $1.9 trillion, according to Northeastern data. The Dow Jones industrial average has risen by 35 percent in the same time period, pushing above the 12,000 mark for the first time since 2008. And labor productivity, ultimately measured by the growth of the economy amid current labor market conditions, has increased by about 8 percent over the same three-year period. But mean weekly wages have risen only 0.4 percent over the past three years, to $796, or by $3, and weekly wages have actually fallen by 0.1 percent over the past year, or by $1 a week, according to Northeastern data. To Northeastern’s Sum, it all adds up to the slowest postrecession wage and salary recovery since the Great Depression - and the largest postrecession accumulation of corporate profits over the same period. It all ties back to jobs - or lack of them - and the subsequent pressures that are keeping labor market wages from rising, Sum said. “The bargaining power of workers has simply deteriorated,’’ said Gary Burtless, an economist at the Brookings Institute, a liberal-leaning think tank in Washington, D.C. “The supply-and-demand equation is off. Workers have no leverage to ask for higher salaries.’’ Some sectors like technology are seeing employment and wage gains, according to recent data from PayScale Inc., which tracks national employee compensation trends. But in many others, economists say, companies aren’t hiring more workers because consumer demand and the economy are still too fragile to justify long-term hiring commitments. Other firms are worried about major government policy changes - such as to the tax code or to the health care sector - that could disrupt their labor costs and bottom lines. It would seem that if unemployment rate drops at a quicker rate we should see wages rise again. But as Fitzgerald reports there are other factors at play. What would you look to, beyond unemployment, as key factors? Read the full article here .
  • Skepticism About Monthly State Jobs Reports

    We all watch the Labor Department 's monthly jobs reports very closely these days. Too closely? Boston Globe business correspondent Jay Fitzgerald spoke to some Boston-based economists and found that there is some serious skepticism about the narrative we journalists build off of the reports, or at least the state statistics. Fitzgerald found that the revisions of 2011 jobs numbers in Massachusetts made the original reports look like they were made up. In Massachusetts, for example, the Labor Department's revised numbers showed an increase of 9,000 jobs for the years, compared to an original figure of 41,000. Fitzgerald writes: To build the estimates, the Labor Department’s statistical agency, the Bureau of Labor Statistics, surveys about 4,400 establishments in Massachusetts. The survey program is voluntary, and employers often don’t respond every month. Even if a monthly payroll response is good, the bureau still has to base its estimates on a relatively small sampling of the state’s nearly 230,000 establishments. Further complicating the process, the Labor Department must estimate the number of new companies that are launched each month and the jobs they create, as well as the number of firms that fail and eliminate jobs. The agency has developed a model to project monthly births and deaths of firms, but it’s not science. “It’s a snapshot of the economy at a given point,’’ Chris Manning, deputy division chief of the Bureau of Labor Statistics current-employment statistics program, said of the monthly reports. “It’s based on just a sample of businesses.’’ Read Local economists question usefulness of jobs reports here .
  • Boston Globe: 'The Rise of Beeronomics'

    This week's Boston Globe Ideas section highlighted the burgeoning new field of beeronomics. Belgian economist Johan Swinnen is one of the leaders of the new field, and he is the editor of the new book, The Economics of Beer . The Ideas section interviewed Swinnen about the importance of beer to trade, industry regulation, and even the significance of microbeweries: SWINNEN: In terms of growth rate, it’s the fastest-growing segment of the beer market. It’s a bit paradoxical that it started in the US, as the type of beers they’re selling are more European-like or Belgian-like. In the US, there has been very strong consolidation of the traditional beer sector. Basically, you can see the microbrew movement as a counterrevolution against extreme consolidation, against the homogenization of beer. There were just a few breweries left, just producing lager beer. A lot of people who enjoyed more variety in beer couldn’t find anything. So people started their own breweries. It has been a tremendous success. IDEAS: For a while there, it seemed as though Americans simply loved light beer. Why did all this consolidation and homogenization happen if there was a market or a taste for other styles? SWINNEN: There is a fantastic chapter in the book by Lisa George, a professor. She argues that there are a number of different reasons. Really important was advertising. It became crucial after the breakthrough of TV. After the 1950s, you could have big companies advertising through the nation. There was the breakthrough of Budweiser and Miller Lite and whatever. Advertising spread the domination of a couple of big companies in the ’60s and ’70s. In Europe, this occurred 30 years later, because commercial TV only came to Europe in the ’90s. Before, it was state-organized broadcasting, and there was no advertising. Since the ’90s and 2000s, Europe has seen exactly the same phenomenon. IDEAS: So television killed local beer, or tried to. SWINNEN: There was also new science and technological innovation in the 18th century. Before, you had beer that was brewed locally, on a small scale. Most of the beer that was brewed was what we now call “specialty beer.” Then people discovered how yeast really worked. When you could control the yeast and the brewing process, you could brew really crystal-clear beer. And you could produce good bottles and ways of cooling better and putting tops on bottles, which made it possible to produce beer on an industrial scale. Read the full interview here .
  • Boston Globe's 12 for 2012: 6 Reasons for Optimism, 6 for Pessimism

    The first work week of 2012 is now underway. As we look ahead to the year ahead, the state of the economy is first on foremost on our minds. Boston Globe Correspondent Jay Fitzgerald offers up no predictions, but rather a point-counterpoint list of reasons to be optimistic, and reasons to be pessimistic, about the economy in 2012. The six reasons to be optimistic: Momentum --that is, 2011 ended with some; Jobs --improving data on that front; Corporate profits --slowed down in 2011, so maybe companies will need to hire in order to get the growth engine humming; Inflation --"remains in check"; Exports --the weak dollar is helping sales of US exports; and Technology --high-tech/scientific sectors remain strong. Before you get too excited, here are the reasons Fitzgerald sites for pessimism: Europe --the old continent starts off 2012 with a lot of uncertainty; The job market --improving, yes, but not quickly enough. Housing --a big problem far from solved; Politics --with an election this year, it is hard to imagine policymakers in Washington coming together on any bold fixes; Energy --oil is back near $100/barrel; and Banks --American banks are better off than their European counterparts, but that is not saying much. What is Fitzgerald's list missing? And do you see the factors on one list beating out those on the other? Read Will 2012 be the year for economic optimists? here .