Friday, November 30, 2012

If I Had A Year...

...a month, a week and a day, I would not be able to produce an essay as cogent and level-headed as "The Declinist Debate Is A Diversion," posted to the Council on Foreign Relations website. (Link)

Professor Gerald Curtis is the smartest writer on Japan. Period.

Later - In his typically more erudite way, Kiwi author Corey Wallace concurs. (Link)


Troy said...

I completely share Dr Curtis' thinking on Japan's prospect.

One other issue that is relatively misunderstood about Japanese demographics is that their baby boom was comparatively small.

Due to the falling birthrate, their dependency ratio will rise this decade, but in terms of absolute burden, Japan is already more than halfway through their rise in old people.

is as good a graphic as any showing how the number of old people will expand moderately from now through 2040, and then actually begin declining as the 1947-49 baby boom leaves us.

(The US will go from 40M now to 90M by 2050, a straight doubling of the elderly care burden, and what's worse, unlike Japan's s-curve rise in elderly, the US's is arriving as a wave!)

Japan will have to focus more on taking care of its elderly population this century, obviously. But this is very labor intensive, which is what the Japanese economy rather needs, work for people to earn a living at.

The point of the economy is people living. I think Japan is going to do OK this century.

At least they can still pay their way in the world. The recent $6B trade deficit was mitigated by the $12B in capital income flow from Japan's $3T net creditor position.

Having a $3T capital position is a nice problem to have!

Anonymous said...

Troy misreads the data of his linked graphs and makes misleading comments about them. ^^;

It is reasoned by most people that the projected demographics to 2050 of the US will be significantly healthier than in much of the rest of the world simply due to the scale of immigration to the US, which is also wealthy and has advanced, scalable infrastructure.

While the US is in the process of aging, it is aging more slowly than northern Eurasia. And even as the population of over-65 Americans booms over the next half century, the US will also be increasing in population over all. Americans 15-65 will continue to increase; it will simply not increase as fast as Americans 65+.

So in reading Troy's graph of aging America, you need to also consider that the population of the US at 2050 is likely to be ~430-450 million. Compared to Troy's Japan graph, his US graph looks significantly better in context.

Northern Eurasia is at the start of a significant slow motion population crash. Even China is in the process of doing its part to bring about this crash. Even with the inevitable repeal of One Child, urban Chinese fertility is predicted to stay low like in HK, Taiwan, NKorea, SKorea, and Japan. In other words, repealing One Child may not make much difference to its future demographics outlook. High fertility in high poverty regions of northern India is projected to push this nation past China in population within decades.

Troy's own graph of Japan bears this out. Notice how the projected size of 65+ Japanese remain roughly the same over the course of the century. This is probably a good thing for relationships. But it is not healthy for a nation's finances if the population overall is also crashing. Japan's cohorts in the 15-65 age groups is what is at present crashing. The Japanese crash will--according to Troy's graph--lead to an impossible ~1:1 dependency by 2100 of retired folks to tax payers. Now that is just projection. We don't know what may happen over a long century. But we do know that the likelihood is high that sometime soon, there will be more Japanese 80+ than 15-. The former cohort is growing. The latter is shrinking.

So when people say that Japan is declining, I think people are projecting Japan's capability over a long horizon and not over a few decades. Japanese will continue to increase their wealth and quality of life in MTC's lifetime and ours. But Japan is now in the middle of the final large group of youths entering the job market. After this, might we finally see experimentation with American style liberal immigration policy?

Troy said...

>you need to also consider that the population of the US at 2050 is likely to be ~430-450 million

yeah, I am, LOL

Sweden has 10M people and they're pretty crowded if you ask me.

Just adding 100 million more people isn't going to increase the wealth-creation opportunities.

100 million more people are going to require we increase our public capital investments 30%, plus of course all the added costs of maintaining what we already have.

100 million more people are going to increase our food consumption, and also consumption of natural resources.

The US is already $4T in the hole wrt the rest of the world, I don't know how long we're going to be given a blank check to get our macro act together.

Japan, on the other hand, has the scary prospect of **not having enough workers** later this century.

I'd rather have their problems than the US's. More is not Better.

Anonymous said...


As Swedish immigration policy is projected to maintain its overall population level fairly stable at ~10-11 million over the next 4 decades, you will, alas, have to deal with their overcrowding a bit longer, though I suspect that Swedes themselves will generally not mind at all.

Their predicted situation is very different from the possible population crash in Japan, and generally steady growth in the US.

Generally, adding 100 million to the US population will not be like adding 100 million to Nigeria, Pakistan, or India. The big change in immigration now is the abrupt end to the massive migration of Mexicans into the states. That's been stopped for a mulititude of reasons, good and bad. With the Mexican economy and middle class growing rapidly, it is possible now to imagine that Mexican immigration will never again be as it was during the mass migration era pre-2007-8.

What we will continue to see however is high skilled Asians who want to study and invest here. Indians and Chinese by themselves make up a third of American scientists. A quarter of US startups have at least one immigrant founder. And even so, the Asian population is set to explode here. Within a few decades, the population of E/SE/S Asians combined will almost be as large as the combined "black" population in the US. Many of these Asians are discriminated against by college entrance institutions because of their overachievment. Even so, they, combined, will continue to enjoy higher earnings per capita than the "white" population.

Historically, adding 100 million Americans has indeed contributed to increased American wealth per capita and there is no reason to believe that the next 100 million will not do so likewise. It still comes down to the fact that the American system and culture remains the most advantageous for entrepreneurs and the highly skilled. This is why I immigrated. In America, having more people does lead to increased jobs and greater tax revenue. Even the simple act of legalizing some informal economy presently dominated by Mexicans would add significant revenue to coffers.

Increasing public capital investment is not my biggest concern. I expect it to happen. But consider some of the key bars to healthy public expenditure. One of these is the increasing ratio of older Americans to younger. This means greater allocation of public funds to public pension and health care. When you have a higher ratio of older people to young workers, public expenditure will tend to favor the old folksto the disadvantage to younger people. In other words, the young get generally worse k-12 schools but some elderly poor actually gets to eat a meal for a day and have a place to stay.

This is widely understood.

And yet you think the Japanese would be better off with an even more extreme ratio?!? 0.o If you think Americans will not be able to afford social services, how do you expect future Japanese to?

But the key reason for the US fiscal mess of the Great Recession has been a set of policies, which follow conservative principles: (1) keeping too low the tax burden on the wealthier population; (2) preference for maintaining an unregulated shadow banking sector; and (3) promotion of "starve the beast" tax policy intended to destroy the fiscal standing of the nation as a destructive incentive to cut social services. At this point, these policies are largely favored by Republicans. It seems to me that because of the likely voting pattern of new immigrants who become citizens, increased immigration will likely only further weaken the conservatives' ability to destroy the fiscal health of the nation.

So yes, I would like more immigration. :p

Anonymous said...

And BTW, so long as Japan fails to raise inflation expectations and devalue the yen, the Japanese will continue to suffer from having "too many workers" for a long time yet, even as its population crashes. Japan's economic problem is that they are underutilizing their economic capacity, not that they are overheating it. In other words, they are suffering from lack of demand, not from having too many workers! (It is different outside large metro areas where many places have experienced the problem of having no replacement workers at all.) Since the problem is slack demand, obviously, the population crash only exacerbates the economic depression because it only further decreases domestic demand! And their export demand is getting hammered because of the global popularity of the yen. The fact that the yen is considered safe is itself a primary cause of the Japanese depressed economy!!! Waiting a few decades for the population to decline to a level in which the economy slips from having the problem of increasingly not enough customers to increasingly not enough workers--replacing too weak demand for too weak supply--seems idiotic to me. And while you wait, a significant number of young Japanese will have wasted their lives unable to work in the field they would have if the economy had been fixed. And while you wait, the debt burden and social obligations of the government will only decrease expenditures on services on the young and on the future.

What Japan actually needs is for a shaking of confidence in the safety of the yen. Sort of what the US is increasingly enjoying. Will the world lose total confidence in the dollar? No. Not in this century. That's definitive. Treasuries remain stable and will remain so. Other currencies will rise as the relative confidence in the dollar decreases. But in the near to mid term, that is what we actually need. But what no one thinks will happen is that the US will "run out of money." This is impossible for a massive economy like the US whose debt is denominated in its own currency, as it is with Japan and the UK.

The US is projected to have a slower growth in 4Q 2012 down from 3Q for various reasons. And yet more and more people now believe that the US will be the economy that will tow the developed world out of its depression over the next few years. A key reason is that Obama's loan modification policies seems to have contributed to ending the threat of a crisis rising from the shadow housing inventory. Another reason for optimism is the continued shale energy boom, which has feuled growth in a few states like North Dakota, Texas, Ohio, and Pennsylvania. And the mere fact of population growth has by itself led to increase in demand for not only goods and services around the country, but also for homes. We had a massive bubble in housing. But increasingly, most bubble-stricken places around the country, including in California, now have greater demand than supply for homes. Home prices and commercial real estate have thus been rising for a while now. Ohio and Michigan are the healthiest they have been in a long long time in terms of job growth. Even California is projected to have a fiscal surplus of over a $1 billion in a few years. And despite economic growth, the shale boom is keeping US energy prices low. And so, Europeans now see this as a good time to negotiate the EU-US FTA and are pushing for it.

Anonymous said...

Your positive perspective about the future of Japan seems to be related to your general anxiety over over-population and your positive feeling towards population crashes. This is not an issue that greatly concerns me however. The potentially destructive boom in population in the 19-20th centuries seems to have had to do with improvements in health services and infrastructure allowing normally highly fertile humans to have more children survive into adulthood. The oncoming population crash of certain groups clearly show that advanced cultures naturally promote destructively low fertility rates. Wealthy people have access to contraceptives and abortion clinics and sex ed. So they actively choose and prefer lifestyles which lead to fewer children.

Most of the growth in population over the next century will come from desperately poor areas of the world--not from wealthier nations. As more of these poor areas become wealthier, I would expect an increase in the rate of population decline. Ours seem not to be a race that grows just for the sake of growing. If given the opportunity, time has shown that most girls prefer to limit pregnancy rates relative to historical norms. It seems pretty clear that without another profound change to society, population growth will level off and ultimately decline well before 200 years have passed.

The US will grow significantly over the next 4 decades. But its internal fertility rate is not all that high either. This is after all why the dominant "white" groups will decline as a percentage of the national population. We will however continue to take many elites of other places.

As for US food security, I am not that worried. Global warming seems to be making life hell for our domestic food producers and for major producers aruond the world, even as food demand has sharply risen in recent decades. But the significant associated rise in food cost the world has been experiencing and which has led to the Arab Spring will likely be endurable for us. Food will merely become available at higher prices for Americans. It's those growing areas that will have the same food security problems they were experiencing when there were a lot fewer people.

Troy said...

all I can say is that up appears to be down in your world.

the biased terminology you frame your argument on betrays your intellectual corruption here.

>adding 100 million Americans has indeed contributed to increased American wealth per capita

100M takes us back to 1975. Wealth per capita has gone up since then, yet the masses' share of wealth has never been lower:

Per-capita GDP:

is only part of the story!

The true story requires understanding that the US has been relying on increasing debt leverage to support our standard of living:

adds debt leverage in red to show how the rises in productivity in the 1980s and 2000s came with increasing and arguably unsustainable debt take-on -- not by the top 10%, but rather the bottom 90%, who owe the bulk of the debt (~70%).

If you think Americans will not be able to afford social services, how do you expect future Japanese to?

For one, Japan's per-capita health expense is $5000 per capita less than the US. Secondly, their fiscal situation just requires them transitioning from being a nation of "savers" to a nation of taxpayers (since they owe their massive debt to themselves).

The tax level has to double in both the US and Japan, but Japan actually has much less uneconomic waste in government spending -- on the spending side, it is running a much tighter ship than the US. Which isn't hard to do, Zimbabwe is probably running a tighter ship than the US in that area.

A large part of the transition for Japan 1950 - 2050 is rotating social spending from youth support to aged support.

For the US, both of these dependent groups are increasing, adding to the systemic stress.

Old people require labor more than anything though so their support will increase employment and raise the wage level as slack is taken up.

This will obtain in the US, too, but our social structure is not as integrated as Japan's, making transition to a social service state politically problematic.

Talking about Japan's mfg labor situation and their high yen has to understand that Japan's powers-that-be like the JPY-CNY cross where it is, as any cheap-labor conservative would. Japan, Inc. has profited immensely from having China's daily wage be Japan's hourly wage, if that.

The Japanese stopped working in Foxconn work conditions in the 1960s!

Anonymous said...

<1>...100M takes us back to 1975. Wealth per capita has gone up since then, yet the masses' share of wealth has never been lower...

On rising inequality in the US since the 1970s, here is what James Galbraith has to say.

(relevant snip)

(more at original source)

I do not agree with everything stated here but I agree with much of it as when he says:

[The story that is often told about what’s happened to factory jobs, and what’s happened to wage rates, is not a good way of getting at the threat to that existence. The typical story is that median wages peaked in 1972 and have been stagnant and falling since then. As a result, it must be the case that people who are working now are much worse off than they were ten, fifteen, twenty years ago. That’s not an accurate story—at least not up until the crisis in 2008—because over that period the labor force became younger, more female, more minority, and more immigrant. All of these groups start at relatively low wages, and they all then tend to have upward trajectories. So there’s no reason to believe that life was getting worse for members of the workforce in general. On the contrary, for most members of the workforce it was still getting better. Plus they had the benefit of technical change and improvement in the other conditions of life.]

So now, Troy, consider that, in 2012, Indian Americans are at the top of the US imcome scale by "ethnicity" (I mean this in the meaningless but colloquially useful way) earning somewhere around ~$88-91,000 per capita. In 1989, they had a per capita income of ~#56,000, even though there were a lot fewer of them.

What accounts for this remarkable growth of wealth in a rapidly growing (but still tiny in the absolute) share of the population? And does it have anything to do with rising inequality in general?

Galbraith's analysis:

(relevant snip+discussion with Mark Thoma)

(original editorial)

[[I]ncome inequality... using tax data recorded by county... declined quite sharply after 2000. Why? Because it tracks, with uncanny precision over more than 30 years, the nasdaq stock index. After declining in the early 1970s, both indices rose almost steadily until they reached an all-time peak in 2000; both fell thereafter. In other words, income inequality in the United States has been driven by capital gains and stock options, mostly in the tech sector. This is what separates that mysterious top .01 of 1 percent from the rest of us: They're the people who run Google, Oracle, and eBay.

County data confirm this: The big income winners in the late 1990s were concentrated in just four counties--Santa Clara, San Francisco, and San Mateo in California (all in the environs of Silicon Valley), and King County in Washington (Microsoft) as well as in Manhattan, the home of the bankers who made it happen. Take the big tech counties out, and the rise in inequality between counties in the late 1990s disappears. And, of course, while these counties were big winners through 2000, they became the big losers in the Bush Bust.]

Though Galbriath does not mention it, Indian Americans happen to be deeply linked to the US tech industry. It may be that their success comes not just from favoring high paying professions in law, medicine, hospitality, and finance. The explosion of their wealth may be mostly due to their over-representation in tech: their engineering ability put them in position to earn large shares in valuable tech equities.

Anonymous said...

Here's Galbraith's presentation at the panel, "The Impact of Inequality on Macroeconomics Dynamics" at the Institute for New Economic Thinking's (INET) Paradigm Lost Conference in Berlin, on April 14, 2012.

You should check out this short video and the videos of the other panelists as well as the Q&A as it gives you a sense of how young the study of modern era inequality really is in macroeconomics. Galbraith's graphs are particulary interesting.

And check out this wealth share graph on Wikipedia.

The Wiki article explains the graph.

So, have Americans become wealthier between 1970-2008? Yes. All groups actually did increase in wealth. But most Americans did not become appreciably wealthier. Americans did not become poorer, however. What was happening is that the top experienced a boom. There is clearly a change in the rate of growth in the 1970s in what Krugman calls, the Great Divergence, between the very top and the rest. The steep and sudden series of rises and falls of inequality during this time has everything to do with with the fortunes of the financial market. Notice how the bottom lines tend to be stable but flat and the top lines volatile but ultimately upward swinging. Only those who had the resources to invest heavily and were connected to investment information and opportunity could have benefited--unless you were skilled in math, physics, chemistry, geology, computer science, or engineering and employed in the right fields or starrting up the right company.

Here is Nasdaq for comparison.

The timing of the big rising "M," for instance, from Clinton to Obama is similar in both.

Anonymous said...

So basically, what Galbraith is saying is:

[I've measured two things: inequality in pay (particularly but not exclusively in manufacturing), and inequality in reported (taxable) income between counties, from the local area personal income statistics. ...[T]hey may cast some light on the underlying economic trends.

The various pay inequality series peak around 1983, rise again a bit in the early 1990s, and generally decline after 1994. That is because as overall economy improves, hours rise more rapidly at the low end of the distribution. (It has nothing to do with changes in relative hourly wage rates, which are not observed directly in the data, but which I believe to be highly stable in general.) For this reason, I have no problem believing that in general the structure of pay became more equal after around 1994.

I keep saying "in general", because a counter-trend of exploding pay develops with the internet boom in the late 1990s, entirely concentrated in the tech sectors. But this is not really a phenomenon of the wage distribution as we normally think of it: it reflects the effect of capital inflows disbursed as salaries, unique to that particular sector, and very temporary as events proved.

The measure of inequality of reported income, calculated between counties, rises to a peak in 2000 and falls thereafter. It is entirely an artifact of the tech boom, something one can confirm from the fact that the rise in relative income is heavily concentrated in the Silicon valley counties and in King County, WA, with minor effects in other predictable places. The fall in inequality afterward reflects the bust. Overall, we found that this series tracks the (log of the) NASDAQ amazingly well over 35 years or so - - a 95.5 correlation, 1969-2004. ...

My takeaway is: it's a mistake to read political messages into rising Gini coefficients or estimates of the income or wealth share earned by some top X-ile. That George Bush and Dick Cheney ran a plutocratic administration is a fact, but it has no particular implications for a Gini coefficient. And the fact that the coefficient declined on his watch does not make Bush into a progressive. It isn't even good news. The main cause was the tech bust.

For this reason, I cringe at some of the use[s] ... of inequality coefficients... I've also never liked the constant harping on CEO pay as though it were a big issue in the income distribution; it's really a corporate governance issue. I expect eventually to be given the Nobel prize for Galbraith's Law of CEO Demography, which states that the entire population of CEO's of Fortune 500 companies is never more than 500 people at any given time.]

Anonymous said...

So while rising inequality is real, whether it caused the Great Recession is unproven, though some try to make the case:

(this post has links to the two papers in question)

[Was inequality to blame for the financial crisis? A paper (pdf) by Michael Bordo and Christopher Meissner suggests not. ...

One can question the relevance of Bordo and Meissner’s evidence. The fact that crises are not often preceded by rising inequality does not disprove that inequality - along with other mechanisms - had a role in this particular crisis.

And there are two other mechanisms through which inequality might have precipitated the crisis:

- Insofar as rising inequality in the 00s was correlated with a rise in wages in the financial sector relative to other industries, it attracted “talent” into banking. And this contributed to its downfall, because “talent” produces not stability but rent-seeking and overconfidence. Remember - banks survived for decades by employing doddering Captain Mainwarings but collapsed soon after hiring physics PhDs.

- One contributor to bank collapses was inequality of power. Top-down management structures produce bosses who combine domineering arrogance with ignorance. As Julian Birkinshaw has said (pdf), the management model in investment banks was one in which “Aggressive and intimidating behaviour is tolerated; effective teamwork and sharing of ideas are rare.”

And even if inequality did not cause the crisis, it is correlated with it. The same growth (pdf) of Asian economies that gave us an excess supply of cheap labour which depressed unskilled wages in the west also gave us the savings glut that produced the housing boom and malinvestments in mortgage derivatives.

But does it much matter whether income inequality contributed to the crisis or not? The Left argued that high inequality was a bad thing long before the crisis, for intrinsic as well as instrumental reasons. Those arguments are as strong (or as weak!) as they ever have been.]

Anonymous said...

So, if the current rising inequality is not in itself the source of the US crisis or even necessarily a crisis, the problem is not so much why the very top won by so much, but why the rest mostly stagnated.

Galbraith wonders:

[There is enormous political appeal in the promise to “bring America back,” after all—to get America moving again, to restore the alleged optimism of the last generation. It’s also baked into the cake of every economic model and every economist’s thought process. It’s very hard to raise the question of whether it’s really possible. There are a few people who do it. It is, of course, a habit in the Marxist tradition to view stagnation as normal and growth as extraordinary. I have never been a Marxist, but I think there are a number of reasons to believe that what we have just come through is a basic turning point and that the period from 1950 to 2000 was historically exceptional, and will not be repeated in the next fifty years.]

It is quite obvious that the tech industrial revolution has not had as widespread an impact as previous industrial revolutions. The auto industry created vast supply chain, dealership, maintenance, infrastructure relations that had widespread impact on the creation of good paying jobs. So when the US auto Big 3 needed a bailout during the crash, we had to give it. But wealth in the tech and finance booms have been defined by the ability to scale up profits by limiting the labor force. The tech boom would probably work if a vast number of Americans had the right skills and there were markets for many more ideas that could scale up into a Google, Facebook, or Microsoft--or at least be bought out for a high sum. But, if Microsoft, Facebook, and Google were to ever need a public bailout, would we need to give it because they posed some systemic risk? I don't think so. We had to bail out the big banks only because the scale of their destructive behavior resulted in an actual mortal threat to the global credit market. But if Google, Facebook, EBay, Amazon, Microsoft, and Apple all simultaneously went down, the nation's economy would hurt. We consumers and businesses would be incredibly inconvenienced. But it would not bring down the US economy. Probably.

The full benefit of the recent tech revolution then seems to have had significantly limited value. A lot of money has indeed been made--but relatively by a very few people. We are in need of the right kind of technological leap, then, to start the world in another round of growth. Otherwise, I think the world will remain in this local maximum of potential growth until that discovery is made. We will all be getting wealthier. Just much more slowly than we would like, plus, with the added burden of increasing energy and food costs and increasing degradation to the environment.

Yeah, I know that the third worlders are growing more rapidly. But that has to do more with benefiting from playing catch up. Their policies alone will not lead the world to another significantly higher growth potential beyond the limits of their particular assets.

Anonymous said...

Nevertheless, I happen to agree with Keynesians like Krugman and Galbraith who attribute the growing harm inflicted on the principle of broadly shared US wealth to the increasing adoption of increasingly extreme US conservative ideology by policy makers between 1980-present.

American wealthy have been paying far too little in taxes to adequately run the US economy and to provide social services for the poor, who are mostly the elderly and children. Plus, the financial system was allowed to take on massively destructive risks that ended up significantly lowering the growth potential of the entire world.

But to the point you are trying to make, none of this, however, has anything to do with US population growth since the 1970s.

The major factors/causes for rising inequality in the US and the recent crisis and debt explosion are consequences of various US policies and not of natural population growth. Taken out of historical context, there is nothing that makes the rise or fall of population have to lead to the rise or fall of the inequality or lower income. There is no disputing that the US is wealthier now than ever and that Americans are expected to grow per capita incomes indefinitely. And in observing better run societies around the world, there is no reason not to believe that policies that lower inequality while promoting broad based growth can improve the health of national economies.

The importance of STEM education to wealth potential as shown by Galbraith's Nasdaq-inequality relationship ties in more with the state of US cultural values moreso than with the growth of its population. In the US, most blacks, hispanics, and a large share of whites have traditionally disdained STEM. Leftists tend to prefer humanities studies and Democrats tend to earn below per capita income. This is all related. The US is in the process of transitioning into high-value-added service-oriented economy. To successfully train young people for future jobs, young people need good educational opportunities. But just as much, a greater share of the young have to want to learn.

Anonymous said...

[Jerome Krase, a professor emeritus in sociology at Brooklyn College, and one of the editors of “Race and Ethnicity in New York City,” said that a growing number of Asian immigrants in recent years had experienced serious adversity in their home countries. “The children hold the honor of the family in their hands,” Professor Krase said. “If they succeed, the family succeeds.”

Complaints about the test and its effect on the racial makeup of the top schools date back at least to the civil rights era. When school officials began openly discussing changing the admissions policy in the early 1970s, white parents persuaded the State Legislature to pass a law cementing the test as the only basis of admission to the specialized high schools. At the time, according to an article in The New York Times in 1971, Stuyvesant High School was mostly white, 10 percent black, 4 percent Puerto Rican or “other Spanish surnamed,” and 6 percent Asian.

This year at Stuyvesant, 72 percent are Asian and less than 4 percent are black or Hispanic.

Melissa Potter, a spokeswoman for the NAACP Legal Defense and Educational Fund, one of the groups that filed the complaint with the United States Department of Education in September, said that though some of the city’s poorest Asian immigrants had found their way into these schools, many were still being left out, for the same reason that poor blacks and Hispanics were: they do not have access to the grueling, expensive and time-consuming test preparation for the exam. The complaint argued that other factors, like school grades, teacher recommendations and personal experience should also be taken into account.

City education officials, as well as Mayor Michael R. Bloomberg, have rejected the idea that the one-test entry system should be rethought. “You pass the test,” the mayor said last month, “you get the highest score, you get into the school — no matter what your ethnicity, no matter what your economic background is.”

The city began offering a free test-prep program several years ago for black and Hispanic students, but after a legal challenge, other ethnic groups were granted the same access to the course. Today, 43 percent of the students in the program are Asian.]

This article documents a familiar pattern in the US and Canada. Even when poor whites, blacks, and hispanics are given opportunities for greater education, it is the poor Asian who are most willing to seize these opportunities.

Anonymous said...

So, we have seen that population growth in itself is neutral regarding impact to changes in level of inequality. The more interesting question is whether immigration impacts changes in level of income growth.

Noah Smith has an interesting break down of the effects of immigration between ~1970-~2008 on rising inequality.

These posts taken together show that immigration has actually increased inequality for Americans slightly. They also show how income growth was affected. Latin American migration has hurt Americans by slightly lowering the stagnant income growth for less educated Americans. But US policies actually limiting immigration of high skilled workers has raised incomes for higher skilled positions in the US. In other words, on the one hand, the US education system and culture fails to produce enough high-skilled labor. On the other hand, the US artificially limits high skilled foreign workers access to US jobs. Combined, the effect is that supply of high skilled workers are then left lower than demand despite their free availability, thus raising the cost of high skill labor. And, of course, you see this reflected in pay growth in SF Bay, NY, or Washington. California has a very high Gini because its policies prefer high paid service industry jobs--which are dominated by Eurasians--to good paying blue collar but dirty jobs and also because the state has massive numbers of Mexican immigrants.

But the future of US immigration looks to see profound changes.

US now sees greater immigration from Asia than from Latin America. Is this good for America?

Anonymous said...

Charles Murray wondering how the Republicans could have lost the Asian vote so decisively writes:

[Politically, a college education is a wash [in comparing whites and Asians]—in the General Social Survey, almost identical proportions of college graduates identify themselves as liberals and conservatives. But Asians are also richer, more often in conservative-skewed professions, equally married, and less often divorced than non-Latino whites—all indicators that normally identify disproportionately conservative voters...

Asians are only half as likely to identify themselves as “conservative” or “very conservative” as whites, and less than half as likely to identify themselves as Republicans. Asians are not only a lot more liberal than whites; a higher percentage of Asians identify themselves as “liberal” or “extremely liberal” (22%) than do blacks (19%) or Latinos (17%). And depending on which poll you believe, somewhere in the vicinity of 70% of Asians voted for Barack Obama in the last presidential election [in 2012].

Something’s wrong with this picture. It’s not just that the income, occupations, and marital status of Asians should push them toward the right. Everyday observation of Asians around the world reveal them to be conspicuously entrepreneurial, industrious, family-oriented, and self-reliant. If you’re looking for a natural Republican constituency, Asians should define “natural.”

Can the Republicans write them off as a special case in the same way that Jews have been a special case? That’s hard to do, because their stories are so different. Many of the Jews who immigrated to America had been socialists, trade-union activists, or otherwise committed to the Left in their native lands, and those family traditions have sometimes perpetuated themselves. The great majority of non-political Jewish immigrants came from places where they had been systematically persecuted for being Jews, and it is easy to see how Jews might have an enduring propensity to side with the underdog.

In contrast, virtually no Asian Americans came here because they were fleeing persecution for being Asian. They sometimes fled political persecution by the Communists, especially from Vietnam, but that experience tends to produce conservative immigrants, not liberal ones. Usually, Asians came to the United States for the traditional reason: America was the land of opportunity where they could rise in the world. Asian immigrants overwhelmingly succeeded, another experience that tends to produce conservative immigrants. Beyond that, Asian minorities everywhere in the world, including America, tend to be underrepresented in politics—they’re more interested in getting ahead commercially or in non-political professions than in running for office or organizing advocacy groups. Lack of interest in politics ordinarily translates into a “just don’t bother us” attitude that trends conservative.

Further, there are reasons for Asian Americans not to like Democrats. Asians who became successful because everyone in the family worked two or three jobs (a common strategy behind Asian success) are likely to be offended by the liberal “You didn’t build that” mentality. Unlike every other minority group, Asians owe nothing to the Democrats for affirmative action. On the contrary, Asians are penalized by affirmative action, especially in the universities, where discrimination against Asian applicants (relative to their superb academic qualifications) has been documented in the technical literature.

And yet something has happened to define conservatism in the minds of Asians as deeply unattractive, despite all the reasons that should naturally lead them to vote for a party that is identified with liberty, opportunity to get ahead, and economic growth.]

Anonymous said...

The Asian Americans are more liberal and more conservative according to how you want to define liberalism and conservatism. I think the Republicans' inability to understand Asian American values may be more an indication that significant numbers of Asians are not integrated squarely into the US-Euro style culture wars. Yes, US-Euro style New Leftism, socialism, and communism flourish all across Asia. And many Asian Americans fit squarely within these ideological groups. But there is not a clear analog to US style conservatism in Asia, even though New Leftists want to paint US evangelicals as the Christian taliban. Some Asian Americans, like Bobby Jindal and Nikki Haley, clearly buy into American conservative ideals. But it may be that many Asian Americans who constitute the growing class of a new US elite may not have a natural home in the US-Euro style culture war. If anything, I think most of these new elites may hold ideologies that are consonant with the ideologies shared by the technocratic people of the world. Or it may just be that Asians are generally too pro-immigration, pro-education, pro-social services, and pro-science to feel kinship with the Republicans. But this is just my musing.

The practical effect these Asians likely will have is to increase inequality and raise per capita income.

Also, there is greater recognition across the political spectrum post-Obama 2012 victory that the US has to implement some sort of useful immigration reform in recognition of the growing political clout of the Mexican immigrant community. One result will likely to make taxable the massive informal economy that hires ~6 million illegals from Mexico.

Anonymous said...

<2>...debt leverage in red to show how the rises in productivity in the 1980s and 2000s came with increasing and arguably unsustainable debt take-on -- not by the top 10%, but rather the bottom 90%, who owe the bulk of the debt (~70%)...

So, who owns US debt?

(Plus further comments by Krugman)

Like Japan's is Japanese, it's mostly Americans. The scale of foreign debt looks large. But that's only because the scale of the US economy is gargantuan. China has been trending out of the dollar. Great! Unfortunately, Japan keeps propping up the dollar because a weaker dollar nowadays means a stronger yen, which is what they don't want.

Here's the break down in July 2012.

<3>...The tax level has to double in both the US and Japan, but Japan actually has much less uneconomic waste in government spending -- on the spending side, it is running a much tighter ship than the US. Which isn't hard to do, Zimbabwe is probably running a tighter ship than the US in that area...

Don't really know what this means. But whatever it means, it is irrelevant. There is no significant economy running optimally today. China, India, Brazil, Japan, EU, and the US are all in a big mess right now. Each created its own particular mess and each is being "wasteful" out of desperation, necessity, and resentment.

<4>...Old people require labor more than anything though so their support will increase employment and raise the wage level as slack is taken up...

Regarding rising wage levels...

[“This so-called mancession is going to cause continuing problems for the marriage rate and birth rate,” she said. “Many young Japanese men say they want to have a stable job before they consider marrying.”

Even so, the shift toward more female employees isn’t likely to boost overall consumer spending because the factory jobs being lost paid more than the newly created service positions. Social services and nursing paid an average 229,732 yen a month last year, 63 percent of the 362,340 yen for factory workers and 62 percent of the 373,288 yen earned in construction, according to the labor ministry.]

...Maybe not.

Anonymous said...

<5>...Talking about Japan's mfg labor situation and their high yen has to understand that Japan's powers-that-be like the JPY-CNY cross where it is, as any cheap-labor conservative would. Japan, Inc. has profited immensely from having China's daily wage be Japan's hourly wage, if that.

The Japanese stopped working in Foxconn work conditions in the 1960s!...

Um, what?

Ok. Auto makers generally prefer to build where their customers are. Many cars for Americans are built within the NAFTA supply chain environment. Cars for Chinese are made in the supply chain complex within China. I don't know where this leaves Japanese factories for the Japanese market when you consider that the domestic market is shrinking in both customers and workers. But Toyota will probably be fine regardless.

Like any other wealthy nation, Japan largely trades with other wealthy people. But even wealthy people want lower prices on certain stuff. The Japanese make a lot of potentially commoditizable and commoditized goods, which over time will have to compete against Korean or even Chinese/Taiwanese pricing. This way, as with the Americans before them, the Japanese ultimately ends up surrendering to their foreign rivals. So, some things, like flat panel manufacturing capability, end up gradually sold off to non-Japanese rivals or just shut down.

[Sharp made my first hi-fi. These days the Japanese electronics brand is etched on my microwave oven. They both cost around £70. There was probably a fat profit margin selling stereos in 1978 when they cost more than half the average weekly wage, and not much of a margin on a generic microwave in 2012. No wonder Sharp warned on Thursday that it will lose $5.6bn (£3.4bn) this year.

Ratings agency Fitch went so far as to say it might not be able to survive on its own, but which of its rivals would want to buy it? Ranking the losses of Japan's electronics conglomerates is a popular game.

Panasonic's cumulative loss over five years is nearly $25bn. Sony managed to register a small profit this week, but only after it sold a chemicals business. Last year the maker of PlayStation and around 16m TV sets a year lost $5.7bn. Its TV assembly lines have lost money for eight years.

These firms need to rescue themselves before they can step in to save Sharp.

And they have much to do. They are all sprawling businesses that have lost too much of their technological edge and mass appeal as companies such as Apple and Samsung muscle in at the top end and China's cheap-as-chips manufacturers steal the mass market business.

All three firms have lost billions investing in solar panel making factories - a once lucrative market stolen by copycat Chinese, German and US manufacturers able to use the high yen to undercut Japanese rivals. A sudden downturn in sales to China following the Senkaku/Diaoyu islands dispute between Beijing and Tokyo has made matters worse.

The problem for Japan is that these businesses are not only major employers and exporters, they are also demanding huge amounts of debt funding to keep themselves afloat, adding to the already massive debts built up by the government over the last 20 years.

It is only as long as employers and the government can fund themselves with bigger and bigger loans that the Japanese economy can stay afloat. At the moment debt is cheap. Japan is a safe haven. And it will stay that way all the while turmoil exists in euroland and Washington procrastinates over planned tax rises and spending cuts due in January that could plunge the US into recession.]

The industry that really and most famously messed up in the last half decade are the consumer electronics giants: Sharp, Panasonic, Sony. Each is expected to shed a great deal of their global workforce, including Japanese, over the next few years. :(

Anonymous said...

Ok, that was longer than I intended and I don't know if I cut and pasted anything wrong.