Hard-working Greeks
At the epicenter of Europe’s financial crisis, Greece has taken a lot of heat for setting off the panic that now threatens to engulf the rest of the continent. One common story line is that inefficient Southern European states are dragging down a more industrious North, a theme we have previously questioned on this blog.
A research note from Marc Chandler, head of currency strategy at Brown Brothers Harriman, highlights the disconnect between a negative perception of Greek workers with actual readings of hours worked from the Organization for Economic Cooperation and Development.
We’ll start with the picture, which pretty much tells the story:
Chandler suggests prejudice has gotten in the way of sound economic analysis:
The conventional narrative about the European debt crisis largely accepts the contention that the periphery of Europe have different work habits and these account to a large extent the economic and financial problems. Yet often time the discussion takes on such ethnocentric dimensions that sometimes it is difficult to see what is real.
The most recent data from the OECD covers 2008 and shows that in that year, Greek workers on average worked 48% more than their industrious German neighbors. The OECD data shows the average Greek worker spent 2120 hours at work compared with 1429 hours in Germany. Moreover, Greece is one of the only OECD countries in which workers were working longer in 2008 than in 1998. With 1802 hours at work, the average Italian employee spent more than 25% more time at work than the average German worker.
While many will be initially surprised by the data, on reflection it makes intuitive sense. In crude terms, wealthier countries typically work smarter–more capital intensively–than poor countries, not longer. Contrary to conventional wisdom, the lack of Greek competitiveness, for example, does not seem to lie in hours working but with the combination of productivity and wages/benefits (unit labor costs).
Inequality highest in 30 years, OECD finds
Income inequality is at its highest levels in three decades, according to a new report from the Organization for Economic Development and Cooperation. The trend is no accident, the group says, but rather the result of a combination of spending cuts on social programs and lower taxes on the wealthy.
Tax and benefit systems play a major role in reducing market-driven inequality, but have become less effective at redistributing income since the mid-1990s. The main reason lies on the benefits side: benefits levels fell in nearly all OECD countries, eligibility rules were tightened to contain spending on social protection, and transfers to the poorest failed to keep pace with earnings growth. As a result, the benefit system in most countries has become less effective in reducing inequalities over the past 15 years. Another factor has been a cut in top tax rates for high-earners.
“There is nothing inevitable about high and growing inequalities,” said OECD Secretary-General Angel Gurria.
The United States, which has seen a wave of national protests focused on the gap between rich and poor, did not fare well in the report. Of the 34 nations in the OECD, the U.S. has the fourth highest level of inequality, after Chile, Mexico and Turkey.
Some other findings for the United States:
– The wealthiest Americans have collected the bulk of the past three decades’ income gains. The share of national income of the richest 1 percent more than doubled between 1980 and 2008 from 8 percent to 18 percent.
– The richest 1 percent now makes an average of $1.3 million in after-tax income (compared to $17,700 for the poorest 20 percent). During the same time, the top marginal income tax rate dropped from 70 percent in 1981 to 35 percent in 2010.
Of course it is. The CEO’s took all the raises for themselves. Some so large that they had to lay-off people, file for bankruptcy, get bailed out, etc… It hasn’t just been a consolidation of wealth though, it’s been as much of a consolidation of power as anything. Look at the newly un-elected leaders of Greece and Italy, corporate person-hood in America, record price matched with record profits, the markets rise to political power, etc… We’re watching a relatively unchallenged Capitalist take-over of our Democracies unfold. Inequality is to be expected.
Being poor is no fun: study
Poor people have shorter life spans and more health problems than the wealthy. Surprising? For growth-obsessed economists, yes actually. A new study from The Organization for Economic Cooperation and Development represents a worthy attempt to move economics away from its traditional tendency to equate growth with well being. Its rankings suggest factors other than the rate of gross domestic product expansion are important in determining quality of life.
But as often happen when economists look for a human angle in their research, they end up stating the glaringly obvious. Take this statement:
Some groups of the population, particularly less educated and low-income people, tend to fare systematically worse in all dimensions of well-being considered in this report. For instance they live shorter lives and report greater health problems; their children obtain worse school results; they participate less in political activities; they can rely on lower social networks in case of needs; they are more exposed to crime and pollution; they tend to be less satisfied with their life as a whole than more educated and higher-income people.
You don’t say? And what about this gem:
Having a job is an essential element of well-being. Good jobs provide earnings, but also shape personal identity and opportunities for social relationships.
OECD economists must be elated then: updating the dense “How’s Life” report each year should keep them employed for the foreseeable future.
from Global Investing:
What worries the BRICs
Some fascinating data about the growing power of emerging markets, particularly the BRICs, was on display at the OECD's annual investment conference in Paris this week. Not the least of it came from MIGA, the World Bank's Multilateral Investment Guarantee Agency, which tries to help protect foreign direct investors from various forms of political risk.
MIGA has mainly focused on encouraging investment into developing countries, but a lot of its latest work is about investment from emerging economies.
This has been exploding over the past decade. Net outward investment from developing countries reached $198 billion in 2008 from around $20 billion in 2000. The 2008 figure was only 10.8 percent of global FDI, but it was just 1.4 percent in 2000.
Not surprisingly, the lion's share comes from the BRICS -- Brazil, Russia, India and China -- which together made up 73 percent of outflows last year. BRIC outward investment jumped to $144.3 billion in 2008 from $29.6 billion three years earlier.
Perhaps the most interesting data, however, concerned political risk insurance. MIGA studied the kind of insurance BRICs outward investors were taking to see what kind of things worried them.
Brazil had a mixed of concerns, but Indians were most worried about transfer and convertibility restrictions, the Chinese concerned themseves with war and civil disturbance and Russians were extremely worried about breaches of contract.
Sceptics might be tempted to see this as a reflection of national concerns. But MIGA said it was more micro than that. Russian investment, for example, is dominated by commodity exploration, an area said to be more subject to contract problems than others.
Health and the older worker
An interesting post on ING’s new eZonomics blog points the reader to a new study on older workers and health. The findings — as reported in The Lancet — don’t at first glance look terribly surprising:
A poor work environment and health complaints before retirement were associated with a steeper yearly increase in the prevalence of suboptimum health while still in work, and a greater retirement-related improvement; however, people with a combination of high occupational grade, low demands, and high satisfaction at work showed no such retirement-related improvement.
In simple terms, this is saying that if a worker is happy, their health is better. Anyone who has ever had a bad job could have told them that! But the study, of course takes it further.
Working life for older workers needs to be redesigned to achieve higher labour-market participation.
This has broad implications, given the trend away from final salary pensions and the general view that workers are going to have to work longer than in previous generations. Companies that are faced with workers who cannot easily retire because of a lack of pension savings, that need people to work longer and that are subject to increasing anti-age discrimination will need to take the employment needs of older employees on board.
It may not be easy. As the ING post points out, the OECD looks at the issue in a 2006 report entitled “Live Longer, Work Longer”. It began its report:
In an era of rapid population ageing, many employment and social policies, practices and attitudes that discourage work at an older age have passed their sell-by date and need to be overhauled. They not only deny older workers choice about when and how to retire but are costly for business, the economy and society.
Consider the fact that corporations are considered citizens under US law. They have deep pockets and legislators listen to people with deep pockets.Our educational systems are tied to corporate interests which is why arts and humanities have been all but stripped from educational circles while the sciences and mathematics take top priority.Retirement costs money. If a worker can keep on working into old age then the likelihood of paying out very much before the retiree dies is much less.Want to keep workers happy? It can be done by making sure they have a safety net. In the Netherlands a person who looses their job can remain on unemployment as long as they are going to school or looking for work. They don’t have to worry about loosing their homes or going without food or health care.With that kind of stress off of the shoulders of American workers it would be easy for them to stay happy and healthy, and thus much more productive. Because they would be at work by choice. And not because they need the money.This article looks at ways to maximize the millage an employer can get out of a worker while investing as little as possible in them. If our courts would do the right thing and remove citizen status from corporate America, then the most important constituents to the legislature would once again be the American citizen and not some amorphous facsimile of a “person” with no individual identity.This article shows how it’s in the interests of business to do better by the employee. But it doesn’t address these problems from the point of the citizen. In other words it doesn’t focus on making sure that citizens have more freedom to choose their occupations by making education more easily accessible. And by providing a financial safety net that does not force them into jobs where they would be the least productive.Even the mightiest trees still get their water from the roots. The citizen is the root of the economy. Our workers are best served when our government prioritizes investment in the individual citizen over investment in corporations.We need a REAL social safety net. But all we get is lip service and taxes, which go to keeping “the economy” alive at the expense of the citizens that support it.
